Please wait...
GulfBase Live Support
Latest News
- Saudi Arabia launches $100m tower project in Syria
- Al-Ansar, Al-Kholood, and Al-Zulfi football clubs offered in first wave of Saudi IPOs
- NBK's strong operational performance continues with robust profits: Al-Sager
- UAE banks' investments surge to Dh774.3 billion by end of April 2025
- QSE index climbs to 11,187 level as bull run continues
- UDC posts net profit of QR137m, revenues of QR1.1bn in H1
- Bahrain national origin non-oil exports surge 12pc to $2.6bn
- Saudi non-oil exports climb 6% to $8.29bn: GASTAT
- Oil Updates - prices gain on US trade optimism, drop in crude inventories
- Du reports a stellar net profit expansion in Q2 2025 with a 25.1% year-over-year growth
Muted earnings amid subdued economic scenario
Saudi Airlines Catering (Catering) reported weak results for 4Q17 with the revenues declining 11.0% QoQ to SAR 536mn, driven by muted sales in retail and catering segments. For FY17, the total revenues dropped 1.5% YoY to SAR 2,223mn, while the net profit plunged 7.2% to SAR 481.7mn. We believe that the company’s financials remained under pressure due to subdued economic scenario for the airlines industry.
Revenues stood at SAR 536mn in 4Q17, up 0.2% from SAR 535mn in 4Q16 (down 11.0% QoQ from SAR 602mn in 3Q17). The decline in top line can be attributable to seasonality. Catering’s top line declined despite signing a contract with FlyNas for inflight catering services which the management believed would have had a positive impact on 4Q earnings.
4Q17 gross profit came in at SAR 157mn, down 1.6% YoY from SAR 160mn in 4Q16 (down 22.2% QoQ from SAR 202mn in 3Q17). Gross margin declined to 29.3% in 4Q17 vis-à-vis 33.6% in 3Q17 on weak sales in catering and retail segments due to seasonality.
Net profit for 4Q17 stood at SAR 98.9mn, down 24.2% QoQ from SAR 130.4mn in 3Q17.
During FY17, the revenues slipped 1.5% YoY to SAR 2,223mn due to lower sales in catering and retail segment. The termination of some non-profitable contracts in remote areas also weighed on the company’s sales. Gross profit for the year plunged 5.6% YoY to SAR 722.8mn from SAR 765.8mn in FY16, thereby resulting in a 1.4ppt decline in the gross margins to 32.5%.
Operating income for FY17 receded 2.8% YoY to SAR 535.4mn, while the net profit for the fiscal stood at SAR 481.7mn (down 7.2% YoY from SAR 519.0mn in FY16), driven by lower sales, higher zakat and income tax in addition to losses from associates.
Catering has announced a dividend distribution of SAR 106.6mn for 4Q17, resulting in
the dividend per share of SAR 1.3. Total dividends announced for FY17 stood at SAR
455.1mn vis-à-vis the FY16 dividend payout of SAR 537.1mn.
In November 2017, Catering has signed a five-year contract worth SAR 501mn with FlyNas for providing inflight catering services, selling onboard food, beverage, and other products apart from providing some logistics services. Catering’s management expects that the deal would ensure sustainability by bolstering company’s cash flows.
The FY17 results of catering were weighed down by weak economic scenario triggered by low oil prices. Moreover, the emergence of low cost carriers in Saudi Arabia pose an inherent threat to Catering’s business model as these airlines do not offer inflight meals. However, considering the positives like company’s diverse service portfolio, zero financial leverage and consistent dividend payouts, we give a ‘neutral’ rating to the stock.
Valuation: We maintain ‘neutral’ rating on Catering with a fair value of SAR 82.6 per share. However, we will review our ratings post the announcement of detailed results.
Click here to download the complete report
Financial Information Co.
P.O. Box 69410, Jeddah 11547, Saudi Arabia