Profit statements

Macro headwinds weigh on profit margins

Current market conditions, including rising fuel costs and inflationary pressures, are impacting profit margins

Current market conditions are creating headwinds for industries and organizations in the Gulf region.

As listed companies report their financial results for the first half of 2022, many cite the pressure created on profit margins by challenges such as geopolitical tensions, supply chain delays and inflation.

UAE-based Fujairah Cement Industries (FCI) posted a net loss of AED29.6 million ($8 million) for the first half of 2022 due to rising energy costs.

Revenue for the period reached AED176.3 million, down 19% from the same period last year. The company attributes this to falling cement and clinker sales and the rising cost of coal used to fuel production plants.

“Rising inflation due to the current geopolitical situation has increased the cost of fuel and energy across the world, which has hurt the profitability of cement plants,” he said in a statement. .

FCI will cease trading on Boursa Kuwait on November 30 and has asked existing shareholders to open an account with Abu Dhabi Securities Exchange (ADX) to continue trading.

In the same vein, Abu Dhabi-listed drugmaker Gulf Pharmaceutical Industries (Julphar) reported a net profit of AED5.2 million for the second quarter of 2022, compared to AED73.4 million. AED recorded in the second quarter of 2021. And this despite the growth in net sales of more than 90 percent.

Julphar says geo-economic headwinds have impacted sales in markets such as Algeria, Ethiopia and Morocco.

On the logistics front, Dubai-listed Aramex saw its profits fall year-on-year due to the post-Covid recovery in physical purchases and the effects of Lebanese and Egyptian pound exchange rates.

Q2 2022 profit for Aramex was AED44.6 million ($12.4 million), down 22% from Q2 2022.

“Covid years 2020 and 2021 have pushed hyperactivity in the express and last mile sector, but this phenomenon is starting to fade,” said Alaa Saoudi, general manager of Aramex Express, in a press release. . “This year, we have started to see a normalization of e-commerce business as well as macroeconomic headwinds.”

Organizations remain cautious even when higher profits have been reported. In its half-year financial results, Saudi Basic Industries Corporation (Sabic) said it expects margins to come under pressure in the second half of 2022 despite a 4% rise in net profit in the second quarter.

“Due to slowing global GDP growth, lockdowns in China, conflict in Europe and ongoing supply chain challenges, we expect margins to be under pressure in the second half of 2022,” he said. said the chemical giant.

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