Saudi retailer’s Q2 profit slumps after Egypt u-turn

Creative Commons/Wikimedia/Abhinav619

• United Electronics’ net profit was $16.4m, down from $33.9m in 2022
• Parent of tech retailer eXtra scrapped plan to open stores in Egypt
• Increase in borrowing costs also affected quarterly results

Quarterly profit has halved at United Electronics, the Saudi parent company of tech retailer eXtra, after it dropped a planned expansion into Egypt.

United’s net profit dropped to SAR61.7 million ($16.4 million) in the second quarter of 2023, compared to SAR127.1 million for the same period last year.

The scrapping of the Egypt plan in May led to non-recurring losses equivalent to SAR38 million, the company said in a filing to the Saudi Stock Exchange on Monday. The results were also affected by increases in borrowing rates: total finance costs rose by SAR13.5 million.

• Electronics retailer eXtra pulls plug on Egypt plans
• GMG opens Egypt HQ with plans for 1,000 new jobs
• Sales slump ‘does not signal end’ for PCs in UAE

United’s Q2 revenue grew by 2.9 percent to more than SAR1.7 billion, supported by growth at its consumer finance business. United Company for Financial Services, known as Tasheel, reported net profit of SAR49.7 million, a year-on-year increase of over 10 percent. 

For the first six months of the year, United posted net profit of SAR146.1 million, compared to SAR224.6 million in the same period of 2022. Revenue was up 2.4 percent.

The company’s decision to halt its expansion into Egypt followed a feasibility review, it said in May, acknowledging that the u-turn would have a financial impact.

There are 48 eXtra stores in Saudi Arabia, plus three in Oman and three in Bahrain. The Egypt plan, initially announced in December 2021, would have been the company’s first move outside the GCC.

Other GCC retailers are moving ahead with expansion plans in Egypt. GMG, which manages more than 120 retail brands across the Middle East, North Africa and Asia, aims to increase its Egyptian workforce 10-fold over the next four years.

In a research note earlier this year, analysts at BMI said international retailers continued to enter and expand in the country, particularly through franchise agreements with regional firms.

Research firm Gartner said shipments of personal computers in Europe, the Middle East and Africa declined by 14.6 percent in the second quarter, the sixth consecutive quarterly decline.

It attributed the decline to continued political unrest, inflationary pressures and interest rate increases .