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Saudi execs’ sentiment soars despite Q1 earnings slump

A trader monitors stocks at the Saudi stock market in Riyadh. Saudi banking stocks are slumping despite steady earnings Reuters/Faisal Al Nasser
A trader monitors stocks at the Saudi stock market in Riyadh. Saudi banking stocks are slumping despite steady earnings
  • AI-based analysis shows sentiment in the kingdom hit a new peak
  • But growing pessimism among execs at Kuwaiti and Omani companies
  • Q1 profits of Saudi listed companies fell 22% year-on-year

Sentiment among senior executives at listed Saudi Arabian corporations hit an all-time high in the first quarter of 2023 despite aggregate profits tumbling by more than one-fifth, studies show.

Iridium Advisors, which is headquartered in Dubai, conducted an artificial intelligence-based analysis of 1,495 Q1 2023 company earnings calls across the GCC.

Business sentiment is how people feel about your brand, or the level of confidence that shareholders have – the prevailing mood about that company’s success.

The results showed sentiment in Saudi Arabia hit a new peak of 40.9 in the first quarter, its highest since the investor relations consultants began tracking the indicator in late 2014.

This was despite research by Saudi financial website Argaam that shows combined first-quarter profits of Saudi listed companies fell 22 percent year-on-year to SAR145.72 billion ($38.86 billion).

Shrinking margins hurt the kingdom’s petrochemicals sector and oil giant Saudi Aramco also posted declining net income.

Saudi’s aggregate quarterly profits were the lowest since the final three months of 2021.

For the first quarter of 2023, energy-related companies accounted for 80.4 percent of total Saudi profits, with banking and telecommunications providing 11.8 and 2.8 percent respectively.

More broadly, Iridium’s GCC Earnings Call Sentiment Index fell to 29.3 from around 31.8 in the preceding quarter, according to AGBI calculations.

Yet sentiment remains above its historical average of 24.3, which “underscores the stability of the GCC markets. It does so amid geopolitical issues, market contractions, escalating interest rates, inflation, banking instability, oil price volatility, and potential recession fears”, Iridium wrote.

Growing pessimism among executives at Kuwaiti and Omani companies was the main cause of the broader regional decline in GCC sentiment, Iridium wrote. UAE and Qatar improved slightly to 43.4 and 24.1 respectively.

In terms of first-quarter earnings, 45 percent of GCC companies covered by Iridium reported results that beat analysts’ forecasts, down from 46 percent for fourth-quarter profits.

This marks the third straight reporting period that the number of companies missing estimates rose.

Executives are becoming more candid on analyst calls, the analysis found. Iridium’s GCC Sentiment Bias Index, which measures the disparity between the language that management uses in the presentation part of earnings calls and the subsequent question and answer session fell to 22.0 in the first quarter. The measure has declined from around 40 in early 2015.  

This trend “underscores an enhancement in the quality of earnings calls” and “highlights the increased professionalism adopted by these companies as the market continues to mature”, Iridium wrote.