Costs and paper losses hold Saudi industrials’ earnings behind revenue

Bigger grid, tighter margins

Saudi Energy’s expanding grid drove another quarter of double-digit revenue growth in 3Q, but higher operating and financing costs left its bottom line broadly flat. Consolidated net income edged up 0.4% y-o-y to SAR 5.35 bn as revenue climbed 12.9% to SAR 35.04 bn and operating income rose just 0.9% to SAR 7.08 bn, according to a Tadawul filing. Higher maintenance costs, borrowing costs tied to its capex plans, lower other income, and increased administrative expenses weighed on earnings, partially offset by lower expected credit loss provisions and stronger contributions from equity-accounted investments, per the filing and the company’s earnings release.

Revenue growth is coming from grid expansion rather than demand. Electricity sold increased just 1% to 276.9 TWh over nine months, while Saudi Energy’s regulated asset base expanded 16.6% y-o-y to SAR 278.8 bn by September as completed transmission and distribution projects entered the network. The expansion increased the revenue allowed under its regulatory framework, and infrastructure project contracts, higher pass-through costs, and customer growth provided additional support. The growing network has also brought higher operating and borrowing costs, a pressure already evident in Saudi Energy’s 2Q results.

Earnings also lagged revenue in 9M, as consolidated net income rose 4.3% y-o-y to SAR 12.08 bn against an 11.5% increase in revenue to SAR 87.24 bn, with higher operating and finance costs absorbing part of the gains. Operating income increased 4.7% to SAR 16.88 bn. Of the consolidated net income, SAR 6.78 bn was attributable to holders of the company’s Mudaraba financing instrument, leaving SAR 5.30 bn for ordinary shareholders against SAR 4.91 bn a year earlier.

Senaat’s earnings go cold

Advanced Building Industries (Senaat) saw its net income nearly wiped out in 3Q 2026, down 98.6% y-o-y to SAR 1 mn from SAR 75.6 mn, while revenue dropped 9.1% to SAR 1.43 bn, according to a Tadawul filing. Operating income fell 68.7% to SAR 38 mn as weaker earnings from its air-conditioning and insulation segments outweighed better results in steel and construction. Lower contributions from associates and joint ventures added to the drag on net income.

Sales dropped across three of Senaat’s four segments, with air conditioning the only business posting higher sales. Net income for 9M fell 55.2% to SAR 49.8 mn, with revenue down 7.8% to SAR 4.2 bn, as lower construction sales outweighed growth in its other three segments. Weaker air-conditioning and construction earnings, smaller contributions from associates and joint ventures, and higher zakat and income tax weighed on the bottom line.

Inventory troubles continue: Senaat’s auditor issued a qualified conclusion on the 9M results after stock records at three air-conditioning subsidiaries failed to match the company’s accounts. Inventory adjustments, including shortages from an April stock count, reached SAR 126 mn as of September, with earlier figures restated, and the auditor could not say whether more corrections will be needed while the investigation continues.

MESC’s copper squeeze

Middle East Specialized Cables (MESC) saw its net income slip 4.4% y-o-y to SAR 19.4 mn in 3Q 2026 even as revenue jumped 55.6% to SAR 592.2 mn, according to a Tadawul filing. Higher sales volumes in the Kingdom and the UAE and rising copper prices drove the revenue gain, lifting operating income 13.5% to SAR 33.1 mn. However, gross margin narrowed to 11.3% from 14.8% as higher input costs hit orders priced before supply-chain disruptions. Over 9M, net income rose 21.4% to SAR 84.2 mn on revenue up 41.8% to SAR 1.56 bn, as sales volumes rose across all cable types and copper prices lifted the price per ton. Gross margin for the period narrowed to 14.1% from 15.1%, mostly because of the weaker 3Q.

Higher costs ate into the gains: Selling and marketing expenses climbed 64.7% y-o-y as larger sales volumes raised shipping costs and customer and sales incentives. Financing costs also rose 68% on higher copper purchase volumes and raw material prices. MESC renewed and expanded an SAR 150 mn financing facility with Alinma Bank earlier this year to support working capital and bank guarantees.

Sinad’s paper losses eclipse sales gains

Sinad Holding’s sales are growing this quarter, but its investment portfolio is dragging on its nine-month results. The company swung to a marginal net income of SAR 0.3 mn in 3Q from an SAR 0.3 mn loss a year earlier, on revenue up 11% y-o-y at SAR 499.2 mn, according to a Tadawul filing. Stronger sales across some of its distribution channels lifted gross income 14.2% to SAR 148.5 mn, outpacing revenue, but most of that gain didn’t carry through to operating income, which rose just 5.5% to SAR 30.5 mn. Lower finance costs and income tax helped tip the bottom line into the black.

Investment valuations weighed on 9M results. Gross income rose 13.4% to SAR 412 mn on revenue up 9.8% to SAR 1.39 bn, yet Sinad’s net loss widened nearly 3x to SAR 17.2 mn from SAR 6.1 mn a year earlier. The company attributed the decline mainly to higher unrealized losses on the fair value of its financial investments and equity instruments, which pushed operating income down 3.5% to SAR 69.9 mn. Higher administrative, selling, and distribution expenses, lower other operating income, FX losses, and zakat added to the pressure.