Saudi Arabian supermarket retailer BinDawood Holding said its second-quarter profit fell 55 per cent on higher operating expenses and lower gross margins.
Net profit after zakat and tax dropped to 42.3 million riyals ($11.5m) in the three months to June 30, down from 95m riyals in the same period last year, the company said in a filing to the Tadawul stock exchange on Wednesday.
Revenue for the period rose 8.7 per cent year-on-year to 1.2 billion riyals as sales increased during the month of Ramadan coupled with easing pandemic-related restrictions and the return of pilgrims for Umrah.
Operating expenses in the second quarter climbed to 315.3m riyals, up from 284.4m in the same quarter last year.
The year-on-year increase reflects the effect of new store openings, investment in human capital and transaction-related expenses from the acquisitions of e-grocery partner International Applications Trading Company and French influencer agency Ykone, the company said.
"These costs are expected as we build for the future," Ahmad BinDawood, chief executive of BinDawood Holding, said in a statement on the bourse. "What is important is our store count is continuing to grow, our revenues are normalising, we have made two serious acquisitions (both of which closed in July 2022) that will benefit the business significantly in the long run and overall, we are generating strong free cash flows and remain debt free.
"In this current macroeconomic situation, it is a position we are happy to be in.”
Saudi Arabia’s gross domestic product is forecast to expand 7.6 per cent this year after 3.2 per cent growth in 2021, the International Monetary Fund said in its World Economic Outlook update last month. Non-oil growth will increase to 4.2 per cent in 2022 before returning to its medium-term potential of 4 per cent.
The Arab world's biggest economy is set to grow at the quickest pace in a decade and will likely be one of the world’s fastest-growing economies this year, the IMF said.
Saudi economy grew 11.8 per cent in the second quarter of 2022, with oil-related economic activity in the kingdom rising 23.1 per cent annually. Non-oil economic activity climbed 5.4 per cent during the period, government data released last month indicated.
Sweeping pro-business reforms implemented by the country, together with a sharp rise in oil prices and increased crude production, have powered the kingdom’s recovery from the pandemic-induced recession in 2020, the Washington-based lender said.
The company’s financial position remains strong, with no bank debt at the end of the second quarter and cash generated from operations in that period reaching 144.8m riyals, from 420.1m riyals in the first quarter of 2022, it said.
As of June 30, the company had a cash balance of 722.6m riyals, including short-term deposit of 220m riyals, which represented an increase of 49.3 per cent from December 31, 2021 due to improved working capital, it said.