MENA Year Book - 2011
•
How did the global economy perform in 2010?
•
Which countries drove the global economic revival in 2010?
•
What were the key themes in global economic performance in the past
year?
•
How did MENA’s economy perform in 2010?
•
Was it fiscal stimulus or revival in energy prices which led to MENA’s strong
economic recovery?
•
Will MENA sustain its economic momentum in 2011 as well?
•
How was the performance of MENA debt and equity markets in 2010?
•
What is the outlook for MENA capital markets in 2011?
1
MENA Year Book - 2011
Executive Summary
Global economies transitioning from recession to growth
Economies around the world rebounded sharply from the global downturn of 2008-09 in 2010.
World GDP grew 5% in 2010, after contracting 0.6% during the previous year. The global economic
revival was largely led by rapid economic expansion in emerging and developing economies. The
IMF estimates these economies to grow 7.1% in 2010, up from 2.6% in 2009. However, the pace of
recovery has been slow in advanced economies with high unemployment decreasing demand from
consumers. Despite this, developed economies grew 3% in 2010 as against the 3.4% decline
posted in 2009.
Slow recovery in the US is due to its high unemployment rate and stagnant housing market; the
country is expected to have expanded 2.8% in 2010. On a positive note, the pick-up in economic
growth in the final quarter of 2009 prompted the IMF to revise its 2011 growth forecast for the US
to 3% from the 2.3% estimated in October 2010. In the Eurozone, Germany emerged as the best
performer, benefiting from a sharp revival in exports even as other countries in the region took a
severe hit due to the widespread debt crisis. The German economy is estimated to have grown
3.6% in 2010, after contracting 4.7% in 2009; it is forecasted to expand 2.2% in 2011. Recovery in
the UK, on the other hand, is slower than expected—the country’s GDP declined 0.5% in the last
quarter of 2010. The economy is expected to grow 1.7% in 2010 and 2% in 2011. Also, the country
is focusing on reducing its high debt and fiscal deficit levels. The government has implemented
significant public spending cuts to address the situation; it has slashed the budget by around a fifth
and is trimming the country’s comprehensive welfare system. The severe austerity drive could
dent growth, considering that the private sector and housing market are still weak. Despite expanding 4.3% in 2010 (as per the IMF), the Japanese economy is mired in deflation—prices have
fallen over the last 10 months in spite of stimulus measures and quantitative easing by the Bank of
Japan. A rising yen has aggravated the situation. This is because the country depends considerably
on imported goods. Therefore, when the currency appreciates, the cost of imports comes down,
lowering the overall consumer prices.
Asia, not hit as hard as others during the global economic downturn, is leading the recovery
among emerging economies. India and China posted strong growth during 2010. The IMF estimates China’s economy expanded 10.3% in 2010, after increasing 9.2% in 2009. India’s GDP, it
projects, grew 9.7% in 2010 relative to the 5.7% growth recorded a year earlier. Rapid growth in
domestic activity and increased industrial production are leading growth in these countries. However, growing inflationary pressure largely due to high food prices is leading central banks across
Asia to tighten the monetary policy and raise benchmark interest rates. China has hiked interest
rates four times so far, while India has done the same seven times to combat inflation. Central
banks in Malaysia, Thailand, Indonesia and South Korea followed suit. Therefore, emerging economies are expected to see a slight moderation in economic activity in 2011 as monetary tightening
takes effect.. An uptrend in energy prices is driving growth in countries exporting hydrocarbons.
The Middle East and North Africa (MENA) region benefited the most from the rise in energy prices.
Among others, Australia, the largest exporter of iron ore and coking coal, gained from strong demand from China and high commodity prices.
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MENA Year Book - 2011
Global economies seem to have recovered from the global economic crisis. However, the emergence of the sovereign debt crisis in Eurozone at the start of 2010 significantly affected economic
recovery in Europe. It began in Greece, where mounting fiscal woes, huge debt and a subsequent
debt downgrade triggered fears of a default by the government. The crisis spread rapidly to Ireland and other debt-ridden countries in the Eurozone, including Portugal, Spain and Italy. Bailout
packages were provided to Greece and Ireland to restore their economies. Also, strict measures in
the form of reduction in government and welfare expenditure were taken. However, the threat of
the sovereign debt crisis is not limited to these countries as other Eurozone members have high
exposure to the government debts of Portugal, Ireland, Italy, Greece and Spain. Therefore, fiscal
imbalances and subdued economic activity in periphery economies (Greece, Ireland, Portugal, Italy
and Spain) are the greatest risks to economic recovery in the region in the near term.
MENA Economies – Uptrend in energy prices aiding growth
Fiscal stimulus played a large role in supporting economic activity in the MENA region in 2009 and
as well as in 2010. Due to the rise in energy prices, oil exporting economies in MENA grew 3.8% in
2010. GCC nations fared even better with the region’s real GDP expanding 4.5%. Qatar posted the
strongest the growth worldwide, a little less than 16.0% in 2010. Saudi Arabia, the biggest GCC
economy, also expanded 3.4% during the year; it grew just 0.6% in 2009. The MENA region’s GDP
is expected to have increased 3.9% in 2010.
Despite higher energy prices contributing to robust growth during the past decade, oil rich countries are taking steps to diversify the economy. Consequently, the non-hydrocarbon sector has
emerged stronger than it was a decade before. In 2009, overall real GDP growth would have been
negative for the MENA region, had its non-oil real GDP not expanded 3.2%. Governments in the
past decade have directed massive revenues from hydrocarbons towards building infrastructure
and human resources to establish a more diversified economy. Some such as Saudi Arabia have
tried to build sustainable industrial bases; others, like the UAE, are focusing on creating trade,
tourism and financial hubs. The Saudi Arabian Monetary Authority (SAMA) and the UAE’s central
bank played a proactive role during the credit crisis by ensuring liquidity in the market and offering
special discount windows. Yet, growth in MENA economies was largely driven by exports, notably
of hydrocarbons, in 2010. According to estimates provided by the IMF, MENA oil exporters witnessed an 18.8% rise in exports to US$944.1 billion in 2010; this indicated a reversal from the
30.6% decline in export values registered in 2009. The revival in exports has meant an improvement in the block’s current account balances. Oil exporters witnessed a steep fall in current account surplus to 4.6% of GDP in 2009 from 19.5% a year before. However, due to the sharp rise in
energy prices, their trade balance increased by about 57.6% to US$186.9 billion in 2010. Oil importers in the MENA region too benefited from the recovery in exports—their trade deficit decreased from US$61.7 billion in 2009 to US$59.6 billion in 2010. Also, government finances in the
region improved and debt levels fell. General government debt decreased from 39.3% of GDP in
2009 to 34.1% in 2010. The drop was more pronounced in the case of oil exporters—debt levels
declined from 27.0% of GDP in 2009 to an estimated 21.0% in 2010.
With economic activity gaining pace in the MENA region, the time to phase-out stimulus measures
gradually has come. KSA, which introduced the largest fiscal package among G20 countries (20% of
GDP) during the global downturn, has begun to unwind some of its economic stimulus.
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MENA Year Book - 2011
Revival of the private sector has meant decreased need for government support even in oil importing MENA economies. Growth has returned in this region, but rising inflationary pressures are
a fresh concern. Inflation in Saudi Arabia, for example, rose from approximately 3–4% in the fourth
quarter of 2009 to about 5.8% in October 2010. Annual inflation in the GCC block is estimated to
have been 4.2% in 2010. Rising prices of food globally as well as natural disasters in major food
producing nations, such as Australia and Russia, and in others like Pakistan are contributing to
supply shortages, resulting in imported inflation. This is because GCC countries, in particular, depend heavily on the rest of the world for food. Food price inflation in Saudi Arabia stood at 8% in
the final quarter of 2010, while it was close to 11% in Kuwait. With the crisis coming to an end,
monetary policies seem to have stagnated. Interest rates are not likely to rise anytime soon even
as inflation edges up in most economies. A major reason for this is that the US Fed is not likely to
tighten monetary policy this year. The pick-up in global economic activity is expected to benefit
the MENA region as countries gain from strengthening fundamentals. Flow of investments from
abroad is expected to increase and this coupled with higher trade is likely to boost activity in the
private sector. At the same time, oil exporters stand to gain from rising energy prices as demand
increases globally aided by healthy growth in emerging markets and higher economic activity in
the US. GDP growth in the MENA region is expected to go up to 4.6% in 2011 from 3.9% the year
before. Sovereign debt concerns (Dubai-related) clouding the UAE’s economy are expected to fade
and the emirate’s overall GDP is likely to grow 3.2% in 2011 compared to 2.4% in 2010. Economic
growth in KSA is expected to increase to 4.5% in 2011 from 3.8% in 2010. Qatar is expected to
retain its fastest growing nation position, with GDP growth rate estimated to exceed 18% in 2011.
MENA equity and debt markets – Benefiting from high economic growth
The impressive macroeconomic performance of MENA countries in 2010 was mainly led by higher
oil prices and a positive global economic environment that revived the region’s capital markets.
MENA performed well on seven major indices in 2010 and ended in the green. Syria’s Damascus
Securities Exchange Index outperformed regional indices, gaining 72% YoY. Qatar’s DSM20 Index
came second, up 25% in the year. Indices of Morocco’s Casablanca Securities Exchange and Tunisia’s Tunis Stock Exchange added 21% and 18%, respectively, in 2010. Banking and financial services emerged as the undisputed leader in MENA in 2010, driven by strong returns in the banking
sector in six of the nine markets covered in our analysis. Egypt’s banking sector recorded the highest returns of 76%. The Qatari, Kuwaiti and Moroccan banking sectors also registered robust gains
during the year. In terms of valuation, Qatar, Egypt and Saudi Arabia look particularly attractive.
Qatar has the second-highest per capita income globally, with its GDP estimated to grow by double digits in 2011.
As regional economies return to growth and equity markets recover swiftly, debt markets in the
MENA region are also staging a comeback. According to MEED, bonds worth US$23.9 billion are
estimated to have been issued in this region in 2010. The number of sukuk issuances decreased to
33 from 34 in 2009. However, this decline is less steep compared to that in 2008–09, indicating
that recovery is underway. Education, healthcare and alternative energy are promising sectors in
the MENA region. Huge infrastructure and development needs in the region are expected to drive
governments to raise funds efficiently and cost-effectively, mainly through debt. As GCC countries
invest heavily in infrastructure, which according to estimates requires about US$2.3 trillion in financing, raising funds through debt securities seems appropriate.
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MENA Year Book - 2011
MOVEMENTS OF GLOBAL ECONOMY IN 2010
From recession to growth
The global economic recovery gathered momentum in 2010, driven primarily by strong growth in
emerging economies. Growth however remained sluggish in advanced economies such as the US,
Eurozone and Japan. On a positive note however, the US economy gathered pace by the end of
The world economy grew
the year with growth estimated to have accelerated to 3.2% in 4Q2010 from 2.6% the quarter
at an annual rate of
before. Overall, world GDP grew at an annual rate of around 5.0% in 2010, sharply reversing
around 5.0% in 2010
course from the 0.6% contraction the year before. Rapid pick-up in economic activity in emerging
economies was the major factor behind the recovery; IMF estimates put the pace of growth for
emerging and developing economies at 7.1% in 2010, accelerating from 2.6% in 2009. On the other
hand, recovery in advanced economies was relatively slow due to high unemployment that decreased consumer demand. These economies grew at a mere 3.0% last year, although their performance was much better than the 3.4% contraction in 2009.
Exhibit 1: Real GDP growth rate for different economic blocks
10%
6%
2%
-2%
-6%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010e 2011f 2012f
World
Euro area
Middle East and North Africa
Advanced economies
Emerging & developing economies
Sub-Saharan Africa
Source: IMF World Economic Outlook, Updated for January 2011 published numbers
Across the world, growth post the downturn of 2008-09 was supported by strong fiscal and monetary support. While governments put forth spending hikes and tax cuts, central banks provided
liquidity windows and slashed interest rates. However, with growth patterns differing between
Most emerging economies adopt monetary
tightening as the risk of
inflation rises
advanced economies and emerging ones in 2010, the nature of policy action seem to be changing.
On one hand, the US Federal Reserve, Bank of Japan, European Central Bank, and the Bank of England continue to keep monetary policy loose in order to support growth while on the other hand,
central banks in emerging economies have tightened policy in order to curb rising inflation. For
example, while the Reserve Bank of India (RBI) raised rates six times in 2010 (for a total of 200
bps), the Bank of China (BOC) raised rates twice. Both banks have also raised their reserve requirements a number of times.
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MENA Year Book - 2011
Economic performance of different blocs/regions
Advanced economies
Growth in US remains shaky
High unemployment and a stagnant housing market continue to cast a shadow on the US recovery.
The unemployment rate in the US rose to 9.8% in November 2010 from 9.6% a month earlier, far
The US unemployment
higher than the 6.9% recorded some two years before. Even though this figure moderated to 9% in
rate was as high as 9.8%
January 2011, weakness in the labor market is set to persist with the share of long-term unem-
in November 2010
ployed rising sharply. Meanwhile, privately-owned housing starts stood at a seasonally adjusted
annual rate of 529,000 in December 2010, down 8.2% YoY. Moreover, new home sales in the
country totaled 329,000 in the month, a 17.5% improvement MoM (Month over Month), but
down 7.6% YoY.
Due to weak economic activity, the US economy grew 2.6% in 3Q2010, below the expected 2.8%.
Nevertheless, the US economic growth is expected to have picked up to 3.2% in 4Q2010. This
prompted the IMF to revise its GDP growth forecast for the country for 2010 to 2.8% in its World
Economic Outlook (WEO) update published in January 2011, from 2.6% provided in its WEO October 2010. It also increased the GDP growth forecast for 2011 to 3% from its earlier projection of
2.3% published in October 2010.
Exhibit 2: US housing starts and new home
Exhibit 3: US unemployment rate, November
sales (in 000’s)
2009 – November 2010 (%)
700
10.3
600
10.0
500
9.7
400
9.4
300
9.1
200
Dec-09 Mar-10 Jun-10 Sep-10 Dec-10
8.8
Dec-09
New home sales
Mar-10
Jun-10
Sep-10
Jan-11
Housing starts
Source: US Census Bureau
The US announced a
The US Fed is however concerned about deflation, as is apparent from their moves at a new round
second quantitative eas-
of quantitative easing. Inflation has been edging lower in the country over the year with latest
ing to pump US$600
figures for December at 1.5%, higher than the 1.1% for the previous month. However, this is below
billion cash into the
the 1.5–2.0% that the US Fed considers comfortable. To address the situation and help the country
economy
recover faster, the Fed recently announced it would pump US$600 billion of cash into the economy by buying treasury bonds and keeping interest rates at the current historic low level of 00.25% for an extended period.
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MENA Year Book - 2011
Strong growth in Germany despite the Eurozone debt crisis
Robust growth in exports and increase in domestic demand, are the factors leading economic expansion in Germany, which remains relatively unaffected by the widespread debt crisis in the Eurozone. As per Destatis, the German federal statistics office, the country’s exports grew 3.8% MoM
German economy grew
and 21.1% YoY to EUR89.8 billion in October 2010. According to the IMF’s latest WEO update pub-
2.2% in 2Q 2010, its best
lished in January 2011, German economy is estimated to have grown by 3.6% in 2010 after con-
quarterly performance
tracting by 4.7% in 2009. The country is also witnessing impressive consumer demand led by low
since 1989
unemployment levels. Unemployment in the country fell to 7% in October 2010, the lowest level
since 1992. Moreover, according to the German Chambers of Commerce (DIHK), strong economic
growth is expected to create more than 100,000 jobs in the second half of 2010. With unemployment declining and personal income rising, domestic demand in Germany is increasing. Final consumption expenditure in the country rose 0.2%, 0.6% and 0.4% QoQ in the first three quarters of
2010, respectively, after declining in 4Q 2009. Continued rise in consumer spending is ensuring
growth to remain stable, and also to reduce its dependence on exports in stimulating economic
growth. Led by Germany’s impressive recovery, the IMF revised its GDP growth forecast for the
country for 2011 to 2.2% from 2% provided in its WEO October 2010.
Exhibit 4: Private consumption in Germany (%
Exhibit 5: Germany’s real GDP and exports
change QoQ)
growth (% change QoQ)
1%
1%
0%
-1%
-1%
3%
12%
2%
8%
1%
4%
0%
0%
-1%
-4%
-2%
-8%
-3%
-12%
-4%
-2%
3Q-07
2Q-08
1Q-09
4Q-09
3Q-10
-16%
3Q-07
2Q-08
GDP
1Q-09
4Q-09
3Q-10
Exports
Source: Destatis - Federal Statistical Office, Germany
Right move by the UK to tackle deficit
The UK economy is undergoing a slower-than-expected recovery due to weaknesses in services
UK GDP growth slowed
and construction. The UK’s GDP contracted 0.5% QoQ in 4Q 2010, after expanding 0.7% QoQ in
to 0.7% QoQ in 3Q 2010
3Q2010 due to harsh weather conditions. However, despite sluggish growth, focus during the early
from 1.1% QoQ in 2Q
part of the year shifted to the country’s burgeoning debt and fiscal deficit levels. The UK’s net
2010
debt, excluding the temporary effects of financial interventions, was an enormous GBP889.1 billion, representing 59.3% of its GDP in December 2010. Moreover, the country’s budget deficit,
excluding the temporary effects of financial interventions, stood at GBP13.5 billion in December
2010.
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MENA Year Book - 2011
In fact, the deterioration in government balances coupled with debt fears pertaining to the Eurozone even evoked concerns to a possible downgrade of the country’s sovereign debt in future. In
UK government depart-
order to tackle the situation, the newly elected Tory – Liberal Democrat coalition enacted sharp
ments are to face an
cuts in public spending. It slashed the budget by around a fifth and nixed the country’s compre-
average budget cut of
hensive welfare system. Government departments, except health and overseas aid, face an aver-
19% over the next four
age budget cut of 19% over the next four years. Some of the biggest reductions are in welfare,
years
which accounts for around a third of government spending. Through these measures, the government expects to save GBP7 billion a year. However, According to Office for Budget Responsibility
(OBR) this austerity drive is likely to cut 330,000 jobs in the public sector over four years from approximately 6 million currently.
The government has also acted on the revenue front, hiking VAT to 20% from earlier 17.5% to be
implemented by early 2011. Income taxes were also increased with income tax rate for high income earners, whose earnings are more than GBP150,000 a year, hiking to 50% effective from
April 2010.
While the government’s austerity measures have brought in applause from markets, pundits ex-
Manufacturing is per-
pect a dent to growth in the economy considering that private sector activity continues to face
forming well in UK with
pressures and the housing market is still weak. However, manufacturing has been performing well.
output rising 1.4% in
Manufacturing output rose 1.4% in 4Q2010 compared to an increase of 1.1% in 3Q2010. The gov-
4Q2010
ernment would also be hoping that a weaker pound combined with initiatives to access emerging
economies would increase trade and thereby growth. The IMF in its latest WEO update published
in January 2011 maintained its GDP growth forecast for the UK for 2010 at 1.7% and 2% for 2011
compared to its October 2010 publication.
Exhibit 6: Government net debt as a % of GDP
60%
Exhibit 7: UK real GDP growth (% change QoQ)
2%
1%
50%
-1%
40%
-2%
30%
Apr-07
-3%
Mar-08
Jan-09
Dec-09
Dec-10
4Q-08
2Q-09
4Q-09
2Q-10
4Q-10
Source: Destatis - Federal Statistical Office, Germany
Japan slips back into deflation
The Japanese economy rebounded sharply from the recession, benefiting from the uptrend in
exports, the pillar economic growth in Japan, as 2010 set in.
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MENA Year Book - 2011
Exports grew 13.5% and 18% during the first two quarters of 2010, respectively, resulting in annualized QoQ real GDP growth of 6.8% and 3%. However despite of a strong growth in 2010 (4.3% in
2010, as per IMF), the worry has been on the deflation front – with prices falling for the last ten
months despite stimulus measures and quantitative easing by the Bank of Japan. The Consumer
Price Index (CPI) in October 2010 stood at -0.6%. Moreover, a stronger yen is affecting the comJapan intervened in the
petitiveness of Japanese products, negatively impacting exports. The yen has risen around 10%
foreign currency market
since May 2010, touching its 15-month high against the US dollar in August 2010. During 3Q 2010,
for the first time in six
growth in exports decelerated to 12.5%. Rising yen has not only affected Japan’s export competi-
years to weaken the yen
tiveness but has also made the fight against deflation tougher. This is because the country depends on a lot of imported goods. Hence, a rising currency results in lower import prices and
thereby leading to a fall in overall consumer prices. To weaken the yen, Japan intervened in the
foreign currency market for the first time in six years on September 15, 2010, by buying dollars.
Moreover, in order to tackle deflation, Bank of Japan kept its key interest rate near zero even in
December 2010. This was in addition to the earlier announced (October 2010) stimulus scheme of
buying assets to increase money supply and drive growth in consumption in the country. The bank
announced a US$61 billion fund to be used to purchase financial assets such as government securities and commercial paper. Furthermore, it is offering JPY30 trillion through a loan program.
Exhibit 8: Japan real GDP and exports growth (Annualized % change from previous quarter)
20%
42%
14%
28%
8%
14%
2%
0%
-4%
-14%
-10%
-28%
-16%
-42%
-22%
-56%
1Q-08
3Q-08
1Q-09
Real GDP Growth
3Q-09
1Q-10
3Q-10
Exports growth
Source: Cabinet Office, Government of Japan
At around 5%, unemploy-
Adding to the worries is a high unemployment rate. At around 5%, unemployment is high relative
ment in Japan is high
to Japanese historical standards. In the light of the strong yen, high unemployment and consistent
relative to its historical
deflation, the economic outlook for Japan for the fourth quarter of 2010 is bleak.
standards
Emerging economies
China, India lead global economic recovery
Asia, not hit as hard as others during the global economic downturn, is leading the recovery. In
most parts of the region, resilience in domestic demand—partly due to proactive policy stimulus—
has offset the drag from net exports.
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MENA Year Book - 2011
Industrial production and retail sales have been strong in China and India, among others. Robust
activity in these countries is in turn powering growth in the rest of Asia.
According to IMF WEO update published in January 2011, China’s economy is expected to have
China’s real GDP grew
grown by 10.3% in 2010, after posting 9.2% growth in 2009. Strong revival in exports was the ma-
10.3% YoY in 2Q 2010,
jor driving force behind this growth. China’s total exports increased 31.3% YoY to US$1,577.93
after increasing 11.9% in
billion in 2010. Sustained growth in retail sales and industrial production confirms that private
1Q 2010
sector activity has advanced beyond the lift from government stimulus. The IMF estimates private
demand in China to account for two-third of growth in the near term and government spending
about one-third. According to China’s Ministry of Industry and Information Technology, the country’s industrial production is expected to rise by 13.5% YoY in 2010. However, rising inflationary
pressures mainly due to increasing food prices has been an area of concern lately. Moreover, rising
property prices and house rents pose the threat of a real estate bubble in the country. To address
this, regulations have been introduced to reduce banks’ exposure to potentially risky property
loans. Moreover, other direct measures such as increased minimum down payments, lower loanto-value ratios, and higher mortgage rates for second homes were deployed to cool the property
market.
India’s macroeconomic performance has been robust, with industrial production at a two-year
high. Leading indicators, the production manufacturing index and measures of business and consumer confidence, continue to point up. The Index of Industrial Production (IIP) rose 10.5% in 2009
In India, the Index of
Industrial Production
(IIP) rose 10.5% in 200910 from 2.8% in 2008-09
-10 from 2.8% in 2008-09. This rise was broad-based with high growth in manufacturing industries
(10.9%), followed by mining (9.9%) and electricity (6.0%). Rapid growth in domestic activity, reflected by the fast rise in inflation, led the central bank to increase the repo policy rate, in steps, by
a cumulative 125 basis points in October. The Reserve Bank of India aims to retain the repo rate at
6.25%, as mentioned in its December 2010 release. Despite the decrease in inflation (based on
annual change in CPI) from 16.2% in February to 9.7% in November, inflationary pressures persist
due to domestic demand and higher global commodity prices. The pace of decline in food price
inflation has been slower than expected mainly owing to structural factors. Low dependence on
exports, accommodative policies, and strong capital inflows have supported domestic activity and
growth. The IMF’s growth estimate for 2010 in its October release was 9.7%, more or less similar
to 9.5% in the July release.
Central banks across Asia move to rein in inflation
Rising inflationary pressures driven by high food inflation is forcing central banks across Asia to
increase interest rates and implement measures to control food prices. In its World Economic OutWorld food prices hit a
look (October 2010), the IMF expected inflation in developing Asia to touch 6.1% in 2010 from
record high in December
3.1% in 2009. Record high food prices mainly driven by supply-side constraints are the primary
2010, moving beyond the
cause for the rising inflation. According to the United Nations' food agency (FAO), world food
levels of 2008
prices hit a record high in December 2010, moving beyond the levels of 2008, driven by high sugar,
grain and oilseed costs. An index of 55 food commodities tracked by the Food and Agriculture
Organization gained for the sixth month to 214.7 points in December 2010, above the previous alltime high of 213.5 in June 2008. Food inflation in many Asian countries, such as India and China, is
in double digits. India's food price inflation rose to a one-year high of more than 18% at the end of
December 2010.
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MENA Year Book - 2011
In China, the cost of food jumped 11.7% at the end of November 2010, while that of non-food
items grew just 1.9%. Rising inflation is a growing concern in other Asian countries as well such as
China raised its benchmark interest rate for the
first time in three years
to 5.6% in October 2010
Malaysia, Thailand, Indonesia and South Korea. In response, nations hiked rates throughout 2010
from the record lows of 2009. China raised the benchmark interest rate for the first time in three
years to 5.6% in October 2010, and three times post that to reach 6.06% in February 2011. India
increased it six times during 2010 to 5.25% at the end of December 2010 and again by 25 basis
points in January 2011 to reach 5.5%. Bank of Thailand raised the interest rate three times in 2010
to 2% by year-end and again by 25 basis points in January 2011 to reach 2.25%. Malaysia too
raised the interest rate thrice to 2.75% by the end of December 2010, while South Korea hiked it
twice during 2010 and once so far in 2011 to reach 2.75% in January 2011.
Exhibit 9: Benchmark interest rates for major Asian countries (%)
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
China
India
South Korea
Nov-10
Sep-10
Jul-10
May-10
Mar-10
Jan-10
Nov-09
Sep-09
Jul-09
May-09
Mar-09
Jan-09
0.0%
Malaysia
Source: Bloomberg
On a negative note, just hiking interest rates is not likely to ease the pressure on food prices. On
China and India have
the contrary, a rising interest rate results in currency appreciation, which hurts exports, the major
started implementing
pillar of many economies. Therefore, several countries have started to implement direct price
direct pricing controls to
controls. China, for example, implemented direct controls to limit the rise in food prices; also, the
tame food price inflation
central government vowed to eliminate speculation in the country's commodities market. India
too increased the release of national stocks of grains and pledged to continue with duty-free imports of crude vegetable oils.
Commodity producers
Revival in energy prices boosts growth for hydrocarbon exporters
The strong growth posted by major hydrocarbon exporters in 2010 is underpinned by the sharp
rebound in energy prices during the year from the lows of early 2009. The MENA region, home to
some of the largest oil & gas exporters, was the biggest beneficiary of the uptrend in energy
prices. The growth was also supported by the prudent fiscal stimulus, which helped drive the nonoil sectors as well. According to IMF, oil prices have increased 23.3% YoY in 2010, after declining
36.3% in 2009.
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MENA Year Book - 2011
The IMF, in its WEO (October 2010), projected the real GDP growth rate for the MENA region for
2010 at 4.1%; the region recorded real GDP growth of 2% in 2009. It is expected to be 5.1% in
2011. Gas-rich Qatar is likely to be at the top position by posting the highest real GDP growth rate
MENA is expected to
grow at 4.1% in 2010,
higher than the 2%
growth in 2009
of 16% worldwide in 2010 compared to 8.6% in 2009. It is expected to be stronger in 2011 in the
country, at 18.6%. Other energy exporters are also likely to record a strong recovery in GDP
growth rate. The GDP of Saudi Arabia, the largest exported of oil exporter, is expected to grow
3.4% in 2010, after increasing 0.6% in 2009. Similarly, the GDP of Russia, the largest exported of
gas, is expected to expand 4% in 2010, after contracting 7.9% in 2009. Sluggish demand from advanced economies, notably Europe, their biggest trading partner, poses a downside risk to MENA
economies. Nevertheless, strong demand from emerging economies is expected to support the
ongoing economic expansion.
Exhibit 10: Real GDP growth of major hydro-
Exhibit 11: Movement in oil prices, Jan 2009–
carbon exporters (%)
Jan 2011 (US$/bbl) QoQ)
20%
100
16%
15%
9%
10%
5%
80
4%
3%
1%
3%
2%
1%
60
-2%
-2%
UAE
-5%
Canada
0%
-1%
40
-8%
Source: IMF, 2010 numbers are estimates
Jan-11
Sep-10
Jan-10
May-10
2010*
Sep-09
Jan-09
20
May-09
2009
Norway
Russia
Qatar
Saudi Arabia
-10%
Source: Bloomberg
Growth in Australia led by rising demand from China
Australia, the largest exporter of iron ore and coking coal, benefited from strong demand from
emerging countries, notably China. Australia’s exports to China grew 18.3% YoY to A$46.5 billion in
2009-10, and 6.3% MoM to A$5.7 billion in November 2010. The country’s growing trade with
Australia’s GDP is ex-
China is ascribed to Australia’s mineral wealth, its proximity to the latter and high commodity
pected to expand at a
prices. The IMF expects Australia’s GDP to expand at the rate of 3% in 2010 compared to just 1.2%
rate of 3% in 2010 com-
in 2009. According to the Australian Bureau of Agricultural and Resource Economics and Sciences
pared to just 1.2% in
(Abares), the country’s commodity exports are estimated to reach A$211 billion for the 12-month
2009
period ending June 2011, up 23% from that in 2009-10. Export earnings for farm commodities are
forecasted at A$30.2 billion for 2010–11, higher than the A$28.5 billion earned in 2009-10. Continued uptrend in commodity prices and strong demand from China bode well for economic growth
in Australia in the coming year. The IMF expects Australia to grow 3.5% in 2011.
12
MENA Year Book - 2011
Major themes of economic importance across the globe
Threat of sovereign debt contagion gains prominence in Europe
The emergence of the sovereign debt crisis in Eurozone at the start of 2010 indicated that the
economic crisis was far from over. Due to its mounting fiscal woes, huge debt and rising cost of
Greece’s debt to GDP
financing, Greece ran into trouble in the early part of the year. The country’s gross debt, a gigantic
ratio stood at a gigantic
115% of its GDP in 2009, is expected to increase to 130% in 2010; fiscal deficit stood at 15.7% of
115% in 2009
the GDP in 2009 (source: IMF WEO October 2010). On April 27, 2010, Standard & Poor's lowered
Greece’s debt rating to the first levels of 'junk' status amid fears of a default by the government.
To restore Greece’s economy, the country was provided with a bailout package of €110 billion by
Eurozone countries and the IMF. While it seemed that the bailout package is helping Greece to
subside the debt crisis, it moved on from Greece to attack Ireland. Ireland’s debt to GDP ratio
spiked to 93.6% in 2009 from 65.5% in 2008. The debt crisis also spread to other countries in the
Eurozone, including Portugal, Spain, and Italy. These Eurozone countries are also struggling with
heavy debt burdens and huge financing costs. Borrowings costs and yields on government bonds
increased in Portugal, while the debt ratings of Spain and Portugal were downgraded. Italy too is
facing a spiraling debt burden. Debt as a percentage of GDP stood at 83%, 63% and 118% for Portugal, Spain and Italy, respectively, in 2009. The attack on Portugal, Spain and Italy has intensified
with repercussions on countries like Belgium as well due to the political instability. High debt and
slow economic growth mean that the debt sustainability of these countries remains uncertain.
Severe austerity measures in the form of cutting government and welfare expenditure have been
taken and bailout packages provided by European countries to restore the economy in Greece and
Ireland. Ireland was given a bailout package of US$137 billion by Eurozone countries and the IMF.
However, the threat of the sovereign debt crisis is not limited to these countries as other Eurozone
members have high exposure to the government debts of Portugal, Ireland, Italy, Greece and
Spain (PIIGS). Furthermore, the debt, totaling around US$2 trillion, is primarily held by European
According to BIS, Ger-
banks, whose exposure is equivalent to around 20% of the Eurozone GDP. According to the statis-
many has the largest
tics provided by Bank of International Settlements (BIS), Germany, Europe’s biggest economy, has
exposure to Greece, Por-
the largest EUR226 billion combined foreign-bank exposure to Greece, Portugal and Spain, fol-
tugal and Spain, at
lowed by France (€210 billion) and Britain (EUR107 billion). European banks are yet to fully recover
EUR226 billion
from the losses of 2008-09 caused by the global financial meltdown and are not well capitalized or
restructured to face further blows. Therefore, significant exposure to sovereign debt poses a serious risk to ensuring smooth economic recovery in Europe. Moreover, the policy of bailouts may
not be sustainable, given the fragile economic conditions in most European countries.
13
MENA Year Book - 2011
Exhibit 12: Combined foreign-bank exposure
Exhibit 13: General government gross debt as
to Greece, Portugal and Spain, EUR billion
a % of GDP for major European countries
140
Rest of
the
world,
216
German
y, 226
120
100
80
60
France,
210
Other
Euro
Area,
326
40
20
US, 52
Greece
Ireland
Source: Bank of International Settlements
Portugal
Belgium
2010
2008
2006
2004
Switzerl
and, 56
2002
2000
Britain,
107
0
Spain
Italy
Source: IMF WEO October 2010
Euro continues to suffer due to debt crisis
Factors such as the sovereign debt crisis in periphery economies, and the bailout packages provided to Greece and Ireland have reduced investor confidence in the euro. The 16-nation currency
Euro has dropped 7.7%
dropped 7.7% to 1.32 on January 05, 2010 from January 2009, and touched a four-year low of 1.19
to EUR1.32 in January
on June 07, 2010. Fears about economic stability in Europe triggered by the debt crisis caused the
2010 from January 2009
euro to tumble the most during 2010 in the past four years. The exposure of European banks to
the sovereign debt of troubled nations is also raising fears of default among investors. Moreover,
the bailout provided to Greece and Ireland and mounting debts in other economies such as Portugal, Spain, Italy and Hungary are raising doubts regarding the sustainability of any such support.
Exhibit 14: Euro’s slide against the US dollar since the start of 2010 (% change)
5%
0%
-5%
-10%
-15%
-20%
Jan-11
Dec-10
Nov-10
Oct-10
Sep-10
Aug-10
Jul-10
Jun-10
May-10
Apr-10
Mar-10
Feb-10
Jan-10
-25%
Source: Bloomberg
14
MENA Year Book - 2011
With economic conditions in Europe fragile and budget deficits swelling from Ireland to Greece,
governments in the region may be forced to cut spending; this could lead to slower-than-expected
recovery in the Eurozone. Until the uncertainty surrounding these issues is over, the euro is likely
to continue to suffer in the near term. This is despite the fact that the US dollar may also remain
weak due to the quantitative easing measures.
US Fed moves ahead with second round of quantitative easing
Slower-than-expected economic recovery, high unemployment and low consumer spending in the
US forced the Fed to roll out the second round of quantitative easing (QE2) in November 2010 to
The US QE2 is intended
to stimulate borrowings
and thereby domestic
spending to drive economic recovery
stimulate growth. The Fed would be injecting US$600 billion into the economy by buying longterm treasury bonds until the end of June 2011 in order to increase money supply in the country’s
financial system. The move is intended to keep the interest rate at its current lows, thereby stimulating borrowings, which in turn would increase domestic spending and support economic growth.
Moreover, the current low level of inflation – lower than the levels which the Fed thinks are comfortable – are also putting the pressure on government to infuse liquidity in order to avoid the
threat of deflation. However, controversies surround the Fed’s policy of using quantitative easing
to stimulate economic growth; whether it is really helping the domestic economy to come out of
the recession is being debated. This is because the excess liquidity, instead of fuelling domestic
spending, is largely being directed towards emerging economies as capital flows since interest
rates are higher in these regions and give increased returns.
According to the Institute of International Finance, net private capital inflows to emerging econo-
Net private capital flows
mies are estimated to have been US$908 billion in 2010, which is 50% higher than in 2009. The
to emerging economies
huge capital flows are driving inflation, oil and commodity prices higher, and could overheat
are expected to be
emerging economies and create asset bubbles. Inflows to China are estimated to have reached an
US$908 billion in 2010
all-time high of US$227 billion in 2010. Net private capital flows in the Latin America are estimated
to have increased 52.7% YoY to US$220.2 billion in 2010 (Source: IIF). Brazil is driving most of the
increase forcing the government to impose capital controls. On the other hand, due to the low
level of interest rates in the US, the Indian rupee is appreciating; this is diminishing the competitiveness of the Indian export sector and widening the current account deficit. The Indian rupee
appreciated by around 5% this year against the US dollar. Moreover, India is financing its current
account deficit through capital flows instead of foreign direct investments. Therefore, a reversal in
capital flows could mean a sharp sell-off of currencies, bonds and equities, creating a liquidity
crunch again. Even as this happens, whether or not it is stimulating economic growth in the US
remains unclear. One way to ensure liquidity for domestic economic activity in the US could be the
country regulating the outflow of capital. This would not only result in utilization of excess cash for
the country’s economic expansion, but would prevent overheating of Asian economies as well.
Threat of uncompetitive currency policies spreads
Sluggish economic recovery has forced consumption-driven economy such as the US to look at
exports as a means to speed up recovery as high unemployment in the country is leading consumers to spend less. Moreover, for other advanced countries, such as Germany, Japan and South
Korea, export is the prime growth engine. Emerging economies such as China and Brazil also rely
on exports.
15
MENA Year Book - 2011
Therefore, to ensure export competitiveness, it is crucial to maintain a weak currency—artificial
devaluation of currencies is, hence, becoming a global strategy. The US administration has been
Artificial devaluation of
currencies is becoming a
global strategy to
achieve export competitiveness
complaining about the artificially low value of yuan; it perceives this as a deliberate attempt to
boost Chinese exports. Likewise, continuation of the loose monetary policy and low interest rates
in the US is weakening the US dollar. The roll out of easy money through quantitative easing is
putting further downward pressure on the US dollar. This has, however, caused other currencies
such as the yen and those of emerging markets to appreciate sharply against the dollar. The Japanese yen, for example, fell to JPY80.4 (per US$) in October 2010, its lowest in the last three years.
The yen’s increasing attractiveness as a safe asset is also one of the reasons for the appreciation
(while the US government debt is primarily owned by foreigners—China and Japan together account for nearly 50%—Japanese government debt is mainly held by domestic participants). The
Brazilian real too touched BRL1.65 in October 2010 from BRL1.75–1.8 at the start of the year. Nevertheless, to support exporters, the Japanese central bank intervened in the currency market by
buying US dollars to keep the value of the yen down. Central banks in Chile, Colombia, Peru, South
Korea, Russia, Taiwan and Thailand too intervened recently in the currency market in an attempt
to stop the sharp appreciation of their currencies against the dollar.
The primary concern of competitive devaluation is that it could decrease international trade and,
thereby, lower global growth. Another fear is unstable capital flows, i.e., ‘hot money’ flows from
countries with loose monetary policy (e.g. the US) to high-growth economies (such as Brazil and
Unstable capital flows
from countries with loose
monetary policy to high
growth emerging markets pose another concern
South Korea). The issue is that these capital flows can be pulled out easily, destabilizing banking
and financial markets. Countries such as Brazil, China, Taiwan, Thailand, South Korea and Indonesia are using capital controls to limit inflows. Thailand, for instance, introduced a tax on foreign
holdings of government bonds to curb destabilizing capital inflows amid fears of a global currency
war. Brazil too tripled the IOF tax on foreign investment in bonds to 6% in 2010 and is considering
various other measures to tackle the excessive capital flows. South Korea is also considering measures such as imposing a withholding tax on foreigners' purchases of Korean treasuries, and a levy
on banks; and further tightening of banks' exposure to foreign exchange derivatives.
Threat of asset bubbles and inflation across Asia
Emerging Asian economies face the risk of overheating as the region’s growth rate is expected to
outpace that of the rest of the world. In the IMF World Economic Outlook, October 2010, the GDP
growth rate for developing Asia is projected at 9.4% for 2010 and 8.4% for 2011, higher than the
CPI in India reached 9.7%
estimate for overall emerging & developing economies at 7.1% and 6.4%, respectively. Asian coun-
in October 2010, while in
tries, which earlier pumped in billions of dollars and cut the interest rate to fuel lending activities,
China; it touched 5.1% in
are now reversing the strategy to remove excess cash from the economies to stabilize growth and
November 2010
rein in inflation. The CPI in India reached 9.7% in October 2010, while in China, it touched 5.1% in
November 2010, the highest in the last two years. Despite a decrease in inflation in India from
16.2% in February, inflationary pressures persist due to domestic demand and higher global commodity prices. The RBI increased the repo policy rate, in steps, by a cumulative 125 basis points to
6.25% in October 2010 to contain inflation. To check the rising inflation, the Chinese central bank
too raised the interest rate for the first time in about three years to 5.56% in October 2010; the
second time, it was increased to 5.69% in December 2010. Economies, including South Korea and
Hong Kong, are also witnessing a rise in asset prices, consumer credit and corporate loans aided by
record low interest rates and government stimulus.
16
MENA Year Book - 2011
Exhibit 15: India – Interest rate & inflation, (%)
Exhibit 16: China – Interest rate & inflation,(%)
7.0
18
8
10
6.0
16
7
8
14
6
5.0
12
4.0
10
8
3.0
6
2.0
1.0
0.0
Jan-08
Dec-08
Nov-09
Interest rate
4
4
2
3
4
2
2
1
0
Oct-10
6
5
0
-2
0
Jan-08
Dec-08
Inflation
Nov-09
Interest rate
-4
Oct-10
Inflation
Source: tradingeconomics.com
Yet another factor causing concern is the spillover of excess liquidity from Western countries in
the form of significant capital flows to Asian countries, such as China and India, which could lead
to asset bubbles. In April 2010, the IMF too warned that Asia is attracting capital inflows that may
cause the region to overheat and create asset bubbles. The hot money has inflated the Indian
Property prices in China
market to an all-time high. The Indian benchmark index, the Sensex, surged 104.61% from
rose almost 24% in 2010
9,708.50 points in March 2009 (when the US first injected US$1 trillion through quantitative easing) to 19,930 in November 2010. The Sensex touched the 20,000 mark in September 2010 for the
first time since December 2007, returning to its pre-crisis level. According to Guangzhou Daily,
property prices in China rose almost 24% in 2010. The NDRC property price index indicates that
property prices recorded their highest YoY increase, above pre-crisis levels, in April 2010. To cool
the property market, China implemented tighter regulations to reduce banks’ exposure to potentially risky property loans, and other direct measures such as increased minimum down payments,
lower loan-to-value ratios, and higher mortgage rates for second homes.
Exhibit 17: China property prices – NDRC property price index (% YoY change)
16
12
8
4
0
-4
Aug-05
Mar-06
Oct-06
May-07
Dec-07
Jul-08
Feb-09
Sep-09
Apr-10
Nov-10
Source: Bloomberg
17
MENA Year Book - 2011
The longer the period of
The results were somewhat visible in the decline in the YoY increase in property price during Au-
monetary loosening and
gust–November 2010. The roll out of the US Fed’s second round of quantitative easing is again
low interest rates, the
expected to boost capital flows to Asian economies. Therefore, the formation of the asset bubble
higher the likelihood of
depends on how the recovery in Western economies takes shape; the longer the period of mone-
Asia entering an asset
tary loosening and low interest rates, the higher the likelihood of Asia entering an asset bubble.
bubble
International trade gains momentum in 2010 after previous year’s sluggishness
Revival in Chinese and German exports
China surpassed Germany to become the
largest exporter in the
world in 2009
China and Germany led exports growth in 2010 as economic recovery boosted global demand.
With exports totaling US$1.2 trillion in 2009, China surpassed Germany to become the largest
exporter in the world. In 2010, China recorded the fastest exports growth in three years. The country’s import & export totaled US$2677.3 billion during January–November 2010, representing a
YoY growth of 36.3%. China’s exports contributed 53.2% (US$1423.8 billion) to total trade during
that period, depicting a YoY increase of 33%. In November 2010, the country’s exports rose 34.9%
YoY to reach a value of US$153.3 billion. During the first quarter of 2010, orders from the US,
European Union and Japan accounted for almost half of the growth.
Germany also registered an increase in exports to a number of euro area countries. The country’s
import & export grew 20.0% YoY to €1614.5 billion during January–November 2010; exports contributed 54.4% (€877.8 billion) to total trade during that period. In November 2010, German exports stood at €88.0 billion, up 21.7% YoY.
Despite global economic recovery providing crucial impetus to German exporters, the third quarter of 2010 was marked by slackened momentum in exports. In real terms, exports of goods rose
by a seasonally adjusted 31 2% on the quarter. During the first two months of the third quarter of
2010, exports to China (which grew very quickly in the first quarter) were not able to fully maintain
the previous quarter’s high-level momentum. Growth in exports to the US was also markedly
lower compared to the first half of 2010. Overall, demand from foreign customers during the year
remained focused on intermediate and capital goods.
Emerging Asia driving import growth this year
Rapid growth in emerging Asia over the last decade has had a significant impact on the global
Developing Asia ob-
economy. In 2010, developing Asia contributed significantly to the increase in world exports; the
served the highest
region also observed the highest change in imports. The International Monetary Fund (IMF) esti-
change in imports in
mates the sector to grow by 22.4% in 2010 from the previous year’s level, primarily led by rapid
2010
industrialization. Advanced economies maintained its position of net importer in 2010, with current account balance of US$110.1 billion; however, the region observed an increase of just 11.3%
in imports compared to the previous year – about half of that reported by developing Asia. Europe
emerged as a net exporter after two years, with a current account balance of US$21.3 billion in
2010. Like advanced economies, Europe observed far less change in international activity (imports
rose only by 9.1%) in 2010 compared to developing Asia.
18
MENA Year Book - 2011
Trading activities of commodity producers improve in 2010
Initial period of the year 2008 was marked by significant shifts in world energy prices after a sharp
rise in the prices of other commodities. However, with the emergence of global credit crisis, comPrices of agricultural
modity prices collapsed during late 2008 and most of 2009. Nevertheless, the year 2010 witnessed
products increased for
steady increase in all commodity groups. Non-energy commodity prices grew for the fifth straight
the sixth straight month
month in November 2010 (up 3.4%) despite slight strengthening of the dollar. Crude oil prices
5.3% in November 2010
increased 3.4% in November, a fourth consecutive monthly rise. Prices of agricultural products as a
whole increased 5.3% in November, up for the sixth straight month. Base metal prices rose consecutively for five months; prices increased 0.8% in November.
Commodity producers were the largest beneficiaries of upward trend in prices. Trade levels of
commodity producers recouped from the lows of 2009. The highest shift in the 2010 terms of
trade (as estimated by the IMF) was observed in the MENA region (10.8%) – much of this can be
attributed to the significant increase in crude oil prices. This was followed by Sub-Saharan Africa
(9.4%), a major producer and exporter of most commodities, including agricultural products, oil,
precious metals and industrial metals. Not surprisingly, the two regions also observed the maximum downward shift in 2009 (-17.5% for MENA and -12.4% for Sub-Saharan Africa).
Outlook on the global economy
US: Unemployment and deficit reduction to confine growth
Unemployment rate in the US has remained close to 10% for the past one year. The figure is not
expected to come down soon, which can be a barrier to the country’s economic growth in the
coming year. In its World Economic Outlook, October 2010, the IMF estimated the US unemployment rate to average 9.6% in 2011; it is not expected to come down to the historical 5% level until
The US unemployment
2015. Persistent high unemployment, stagnant wages resulting into a weak consumer spending
rate is expected to aver-
(constituting almost 70% of the US economy) is expected to keep the US economic growth sub-
age 9.6% in 2011 and is
dued. Federal deficit and record high national debt are other threats to the country’s economy.
not expected to come
According to the IMF, the country’s general government gross debt is estimated at 92.7% of GDP
down to the historical 5%
in 2010, the highest since World War II. Moreover, the US president recently passed a US$858
level until 2015
billion tax-cut bill to encourage the ailing economy. This is expected to further raise debt burden
on the country. Loss of tax revenue has already forced many state and local governments to cut
services and lay-off workers. Increased debt level can force the government to implement deficit
reduction measures in the near-term, thus posing a risk to economic growth in the coming year.
The IMF has forecasted the US economy to grow at 2.3% in 2011, 0.6% lower than its earlier estimate (July 2010 report).
Eurozone: Periphery economies remain a concern
Greece’s economy is
expected to contract
2.6%, in 2011
Fiscal imbalances and subdued economic activity in periphery economies (Greece, Ireland, Portugal, Italy and Spain) pose the greatest near-term threat to economic recovery in the Eurozone. In
2011, Greece’s economy is expected to contract 2.6%, while Portugal’s economy is forecasted to
decline 0.05%. Spain, Italy and Ireland also exhibit weak economic prospects for 2011. Strong activity in Germany and France is the only symbol of hope for a steady Eurozone economic growth in
2011.
19
MENA Year Book - 2011
According to the IMF, in 2011, Germany and France (two of Eurozone’s largest economies) are
expected to expand by 2.2% and 1.6%, respectively. However, substantial exposure to government
debts of Greece, Portugal, Ireland, Italy and Spain is a major risk for European economies. Fiscal
consolidation and austerity measures to reduce debt burden in periphery economies point to feeble overall growth in future. According to the IMF, Euro area is expected to record a growth rate of
1.5% in 2011, lower than the 1.7% in 2010.
Emerging economies: Growth may lower as policy tightening takes effect
After witnessing rapid economic recovery, emerging economies are expected to see a slight moderation in economic activity in 2011 as Asian countries adopt monetary tightening measures to
contain inflation. According to the IMF projections, the Chinese economy is expected to expand by
9.6% in 2011, after growing 10.3% in 2010. India’s economic growth is also expected to slow to
8.4% in 2011 from 9.7% in 2010. Moderation in economic activity is expected in the light of tighter
quantitative limits on credit growth; measures to cool the property market and limit exposure of
Moderation in economic
banks to this sector; and planned unwinding of fiscal stimulus in 2011. Commodity exporters Aus-
activity is expected in the
tralia, Indonesia and New Zealand are expected to maintain their economic growth momentum.
light of tighter quantita-
Australian economy is expected to expand by 3.5% in 2011, higher than 3% in 2010. Similarly, In-
tive limits on credit
donesia and New Zealand are expected to grow by 6.2% and 3.2%, respectively, in 2011 (compared
growth
to 6% and 3% in 2010). The Latin America and the Caribbean region may record slower growth due
to tighter monetary policies. MENA and African countries are likely to benefit from higher energy
prices. The IMF estimates the overall growth of emerging and developing economies at 6.4% in
2011, lower than 7.1% in 2010. Overheating, inflation and high capital flows remain near-term
concerns for emerging economies.
Outlook on key issues
Structural reorganization of economies to begin
With the pace of economic recovery gradually gaining momentum, countries such as China and
the US are forced to reassess their economic policies. The recent global economic crisis has exposed China’s dependence on exports to fuel economic growth. This makes the country more vulnerable to slowdown in the US and Europe. Similarly, as the US had debt-driven consumption pattern, liquidity-strapped consumers were suddenly denied access to borrowing amid the credit
crunch. Being a consumption-driven economy, the US suffered the most due to reduced consumer
spending. Hence, the US would be required to focus more on increasing exports and investment in
order to drive the economy away its large dependence on debt-ridden consumption pattern. China
as well as other export-driven Asian countries would need to adopt economic policies and strategies that rely less on exports to the west. China is therefore feeling the need to stimulate domestic
household consumption and reduce dependence on exports.
Commodity prices to continue rising
Demand for agricultural
commodities too is likely
to outstrip supply, keeping prices high
The uptrend in commodity prices is expected to continue led by sustained demand from emerging
and developing economies. Major commodities such as gold and oil are expected to remain strong
in 2011. Demand for agricultural commodities too is likely to outstrip supply, keeping prices high.
Major factors driving food prices high are tightening of inventory levels, limited supply and strong
demand from emerging markets, notably China.
20
MENA Year Book - 2011
Growing importance of agricultural innovation
Food security has become an important global agenda amid soaring food prices and growth in
population worldwide. According to the UN Food and Agriculture Organization, food production
must increase 70% in order to feed 2.3 billion more mouths by 2050. One way of achieving this is
Food production must
through greater innovations in agriculture, as natural resources are finite and the land area avail-
increase 70% in order to
able for farming is limited; modern techniques would help expand productivity in every facet of
feed 2.3 billion more
agriculture. However, this requires massive and continuous investments in technological advance-
mouths by 2050
ments, towards building the appropriate infrastructure, and in training programs to help farmers
access updated information and markets. Some of latest initiatives in this regard are being carried
out in Africa. The Improved Maize of African Soils (IMAS) Alliance brings together foundations,
national research institutions, international donors and the private sector in a program to develop
new maize varieties that use fertilizers more efficiently. Similarly, researchers at the University of
Bern have recently teamed up with those in the private sector to explore ways to improve the
yield of tef, the most important cereal crop in Ethiopia. Furthermore, an innovative program in
Kenya, involving a mobile phone application payment system and automated weather stations,
offers insurance against financial losses if the crops are ruined by drought or floods. More such
initiatives are required to increase food security.
Necessity of investments in renewable and nuclear energy
With demand for energy increasing globally, especially in emerging economies, amid constrained
supplies, prices are likely to keep rising. Consequently, production rates are increasing; moreover,
resources are finite, which raises questions about the sustainability of conventional energy supplies. Considering that conventional energy sources are increasingly becoming unaffordable and
scarce, the need to develop alternate energy resources is urgent. Renewable and nuclear energy
Europe aims to increase
resources must be developed rapidly as greater economies of scale can make their implementa-
the share of renewable
tion economically viable. Legislative barriers too should be reduced to facilitate the development
energy to 20% in the
of renewable energy projects, the required infrastructure and technology. Advanced economies
total energy consump-
such as the US, Germany, Spain and Denmark are ahead in the development of alternative energy
tion by 2020
resources such as solar and wind. However, emerging economies are far behind in terms of investment in renewable energy. Significant investments are required to implement renewable energy
projects, but technological advancements and economies of scale can considerably reduce the
cost of electricity generation in the medium to long term. Many governments have announced
plans to diversify their energy mix by utilizing alternate energy resources, and have set targets for
the consumption of alternative energy. For example, Europe aims to increase the share of renewable energy to 20% in the total energy consumption in the region by 2020.
Greater flexibility in emerging market currencies needed
Greater appreciation of
the yuan is required to
eliminate global trade
imbalances
The lack of flexibility of the Chinese yuan’s exchange rate against the US dollar has been a source
of conflict lately. Currencies in other emerging markets are driven by market forces—a depreciation of the US dollar results in a sharp appreciation of the currency in these countries. However,
the Chinese Yuan changes only little due to the lack of flexibility. Countries such as Brazil, Chile,
Colombia and Peru as well as fast-growing, developed economies such as Australia and South Korea face large pressure of currency appreciation. This is hurting their export and import-competing
sectors, principally agriculture and manufacturing.
21
MENA Year Book - 2011
Consequently, some countries have lost market share to China in exports, especially to the US. This
is forcing these economies to take measures such as currency appreciation, reserve accumulation
and capital controls. These actions could adversely impact competitiveness in trade and dent the
rapid global economic recovery. Therefore, greater appreciation of the yuan is required to eliminate global imbalances and reduce undue exchange rate pressures on fast-growing developing
nations.
22
MENA Year Book - 2011
MENA ECONOMIC MOVEMENTS
MENA economies posted healthy growth in 2010
Reviving global economic activity post the downturn of 2009 has brought forth a stark difference
in growth patterns over the years. In contrast to decades before when global growth was primarily
driven by the advanced economies, this time around it has been emerging economies across Asia
and Latin America that have aided the recovery. While China, India and Brazil have mostly hogged
From 5.0% in 2008,
the headlines off late, the Middle East and North African (MENA) region has also been growing
growth for the MENA
fast, thereby attracting increasing amount of foreign investment and enjoying ever growing living
region more than halved
standards. This has been true for both hydrocarbon-rich countries as well as others in the region.
to 2.0% in 2009
However, toward the end of 2008, growth slowed as the global downturn started having a negative impact on trade, investments and oil prices. From 5.0% in 2008, growth for the MENA region
more than halved to 2.0% in 2009. Oil exporters faced greater volatility with the GCC countries in
particular witnessing a slump in growth to 0.4% in 2009 compared to 7.0% a year before. On the
other hand, growth for oil importers fell only marginally to 4.6% in 2009 from 4.9% a year before.
Exhibit 18: Real GDP growth rate for different economic blocks (%)
8
6
4
2
0
2006
2007
MENA
2008
Oil importers
2009
Oil exporters
2010E
2011E
GCC
Source: IMF WEO, October 2010; for MENA updated January 2011 figures have been used
Upward movement in global energy prices aid growth
However, as global growth rebounded last year, so did the fortunes of MENA economies. While
fiscal stimulus played a large role in propping up economic activity in 2009 and well into 2010 as
Fiscal stimulus and rise in
energy prices played a
large role in propping up
economic activity in
MENA in 2009 and 2010
well, improving fundamentals brought about renewed private sector activity. At the same time,
rising international trade with its subsequent impact on higher movement of goods benefited
countries like Egypt and the UAE. Meanwhile, the rise in energy prices since 4Q09 propped up
growth for oil exporting countries. Rising economic activity across the world, primarily led by
China, India and Brazil propped up oil demand. Estimates by the International Energy Association
(IEA) put total oil demand for 2010 at 87.3 million barrels/ day (mb/d), 2.3 mb/d higher than the
figure for 2009. Consequently, according to the IMF, average oil prices rose by as much as 23.3% in
2010, after having fallen by a little more than 36.0% in the previous year.
23
MENA Year Book - 2011
With reviving energy prices, oil exporters in the MENA region witnessed growth shooting up to
Qatar continued to lead
3.8% in 2010. GCC countries fared even better with real GDP for the region expanding by 4.5%.
the pack with a stellar
Qatar continued to lead the pack (and the world) with stellar growth of a little less than 16.0%.
growth of around 16.0%
Even in 2009, the country had clocked GDP growth of 8.6%, which was in stark contrast to the
slowdown experienced by many countries across the globe. Saudi Arabia, the region’s largest
economy, also saw growth moving up sharply to 3.4% from a mere 0.6% in 2009. Oil importers, yet
again displaying lesser volatility than their energy-rich peers, are estimated to have experienced a
marginally higher growth figure of 5.0%. While Egypt is set to grow at 5.3%, Morocco is expected
to grow by 4.0%. Overall, total MENA GDP is expected to have expanded by 3.9%.
Exhibit 19: Growth in key MENA economies
Exhibit 20: Oil prices have revived in 2010
100
30
80%
60%
80
20
40%
60
20%
40
0%
10
-20%
0
20
-40%
0
Morocco
Saudi Arabia
UAE
-60%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010E
2011E
Egypt
Qatar
Tunisia
2007
2008
2009
2010E
2011E
2012F
2001
2002
2003
2004
2005
2006
-10
Avg crude price (US$ billion)
Annual growth - RHS
Source: IMF
Contribution of the non-oil sector to growth
Despite strong growth over the past decade owing to higher energy prices, oil-rich countries in the
A 5.4% decline in oil real
GCC region have tried hard at diversification of their economies. This has become more important
GDP dragged down over-
for countries like Bahrain and Oman whose oil reserves are slated to run out in the next decade.
all growth to a mere
However, despite significant strides towards developing their non-hydrocarbon sectors, GCC
0.4% in 2009 compared
economies are still subject to the vagaries of the world energy markets. The downturn of 2009 was
to 7.0% in 2008
no exception with a 5.4% decline in oil real GDP dragging down overall growth to a mere 0.4%
compared to 7.0% real GDP growth a year before. While highlighting the dependence of these
economies on oil and gas, the downturn however brought forth the encouraging trend of a
stronger non-hydrocarbon sector than a decade before. In fact, in 2009 overall real GDP growth
would have been negative if not for a 3.2% expansion in non-oil real GDP of the region. Much of
the rise in economic activity in the non-oil sector was also a result of fiscal stimulus measures by
respective governments to support growth in the face of sharply falling energy revenues.
24
MENA Year Book - 2011
Exhibit 21: GCC oil & non-oil real GDP growth
9
7.2
8.1
40
5.4
6
3.6
3
2.5
1.1
Exhibit 22: GCC non-oil real GDP growth
3.8
3.5
4.6
4.3
30
20
1.1
0
10
-3
0
-6
-10
2006 2007 2008 2009 2010E 2011F
-5.1
2006 2007 2008 2009 2010E 2011F
Non-oil real GDP
Oil real GDP
Bahrain
Kuwait
Oman
Qatar
KSA
UAE
Source: IMF
Overall movement in the region’s diversification agenda
Governments over the past decade directed burgeoning hydrocarbon revenues toward building
Special economic zones
infrastructure and human resources in order to establish a more diversified economy. Regulations
have been set up to
covering banking, real estate and financial services have also been brought in and have been con-
boost re-exports, manu-
stantly monitored and updated in order to encourage greater private sector activity. Special eco-
facturing and financial
nomic zones have been opened to boost re-exports, manufacturing and financial services. At the
services in MENA
same time, the region has been trying to encourage greater investment in the petrochemical sector in order to exploit its competitive advantage of high oil and gas reserves. Investments in other
energy-intensive industries like aluminum have also gone up. With growing integration within the
bloc, investors in GCC countries now face a wider market and this has become even wider with
trade linkages to the rest of the Arab world and to the rest of the world.
However, there are subtle differences in the direction of diversification of GCC economies. While
some of them like Saudi Arabia have tried to establish sustainable industrial bases, others like the
UAE have been focusing on creating trade, tourism and financial hubs. Even within the UAE there
have been fair amount of diversity in the path to development. However, across the entire region,
there seems to be an increasing focus on developing knowledge centers to induce research and
also to create a pool of human talent that is able to garner the new opportunities arising in industry and services. Interestingly, sectors like renewable energy have also come into focus with Abu
Dhabi taking the lead by going ahead with the creation of the world’s largest sustainable zerocarbon habitation – Masdar City. The Emirate currently hosts the headquarters of the International
SAMA and the UAE Central Bank proactively
ensured liquidity and
offered special discount
windows during the
credit crisis
Renewable Energy Association.
Institutions have also become stronger over the years. The Saudi Arabian Monetary Authority
(SAMA) and the UAE Central Bank were proactive during the credit crisis by ensuring liquidity and
offering special discount windows. SAMA has also been applauded for its role in enabling the Saudi
banking sector to overcome the pitfalls of a real estate bust in neighboring peers in the GCC.
25
MENA Year Book - 2011
Exports aid the revival in economic activity in 2010
MENA oil exporters benefitted from higher energy prices
GCC countries’ exports
One of the key ingredients of growth in the MENA region in 2010 was exports. This is more pro-
rose 17.7%YoY in 2010
nounced for hydrocarbon exporters in the region as they suffered from declines in both demand
reversing course from
and consequently prices in the global energy market. According to IMF estimates, MENA oil ex-
the 29.8% YoY decline in
porters are supposed to have witnessed an 18.8% rise in exports to USD 944.1 billion in 2010. This
2009
is a sharp and encouraging reversal from the massive 30.6% decline in export values in the year
before. The six nations of the GCC, which accounted for an estimated 70.4% of exports from MENA
oil exporters in 2010, saw export growth turn positive during the year – the bloc’s exports rose
17.7% reversing course from the 29.8% decline a year before.
Exhibit 23: Revival in exports in 2010 for MENA countries: annual growth in exports
40%
33%
25%
10%
18%
30%
28%
-5%
19%
-31%
-20%
5%
10% 11% 9%
-12%
-30%
-35%
2008
2009
MENA Oil Exporters
2010E
GCC
2011F
MENA Oil Importers
Source: IMF
MENA oil importers also witnessed a change in fortunes on the external sector front though the
pace of recovery in exports was not as much as their energy-rich peers in the region. This is natural
considering the volatile nature of energy prices, which was most evident during the boom of 2008
MENA oil importers saw
and the subsequent sharp decline in 2009. Overall for oil importers, exports rose 4.4% to USD 181
exports rising 4.4% YoY
billion. Although the figure is a great improvement from the 12.0% decline in 2009, it is neverthe-
in 2010 – large improve-
less much lower than the 27.2% growth in export values in 2008. However, export growth for
ment over a 12% YoY
these countries is set to accelerate this year to 9.1%. Exports from oil exporters on the other hand
decline in 2009
are set to accelerate much slower this year than in 2010 – total value is set to rise by 9.9% to touch
USD 1037.5 billion.
Improvement in current account balances in 2010
The revival in exports for the MENA region in 2010 has meant an improvement in current account
balances for the bloc. For oil exporters, whose surplus in the current account had fallen sharply to
4.6% of GDP in 2009 from 19.5% a year before, a sharp upturn in energy prices pushed up the
trade balance by about 57.6% in 2010 to USD 186.9 billion. Consequently, the current account
surplus for these countries as a whole went up to 6.7% of GDP for the year and the figure is expected to go up to 7.8% in 2011.
26
MENA Year Book - 2011
For the GCC, the current account surplus is estimated to have moved up to 10.2% of GDP in 2010
from 8.7% a year before; the figure is expected to move up to 11.2% this year. For oil importers
within the MENA region, reviving exports meant an improvement in the trade deficit – from USD
61.7 billion in 2009 to USD 59.6 billion in 2010. Consequently, the current account deficit improved
to 3.5% of GDP in 2010 from 4.4% in 2009.
Exhibit 24: Current Account balances (as % of GDP) – positive figure denotes surplus
30%
24%
19.5%
20%
-4.7%
7.8%
6.7%
4.6%
0%
11%
10%
9%
10%
-3.5%
-4.4%
-3.6%
-10%
2008
2009
MENA Oil Exporters
2010E
GCC
2011F
MENA Oil Importers
Source: IMF
Government finances improved in 2010
Government finances in the MENA region deteriorated during the downturn of 2009 as individual
governments launched fiscal stimulus packages in order to support economic activity. GCC governments were however best placed during that time to initiate fiscal measures as their balance
sheets looked much healthier than their compatriots. In fact, GCC governments over the years had
Saudi Arabia has reduced
been using their energy revenues to reduce overall debt levels and improve their budget balances.
its government debt
For example, Saudi Arabia has brought down total government debt from about 77.3% of GDP
from about 77.3% of GDP
over 2000-05 to an estimated 16.0% last year. At the same time, Kuwait has reduced government
over 2000-05 to an esti-
debt from about 25.2% of GDP to 7.7% over the same period. In fact, debt levels would have been
mated 16.0% last year
lower had it not been for higher government support to the economy. In 2010, as governments
withdrew from stimulus measures and saw revenues rise, debt levels fell. For the MENA region as
a whole, general government debt fell from 39.3% of GDP to 34.1%. The reduction in debt levels
was more pronounced in case of oil exporters whose debt levels fell from 27.0% of GDP in 2009 to
an estimated 21.0% in 2010. GCC countries saw their debt levels reduce to 15.5% of GDP from
18.4% over the same period.
27
MENA Year Book - 2011
Exhibit 25: Fiscal balance as a percentage of
Exhibit 26: General government debt as a
GDP
percentage of GDP
80
40
70
30
60
20
50
10
40
0
30
20
-10
10
-20
2006 2007 2008 2009 2010E 2011F
Saudi Arabia
Egypt
0
Lebanon
2006 2007 2008 2009 2010E 2011F
MENA
Oil exporters
Oil importers
Source: IMF
Oil revenues aid government finances
In 2010, however, as revenues increased for governments on the back of higher economic activity
and energy exports, fiscal balances improved for oil exporters in the MENA region. Stimulus measFiscal balances improved
for oil exporters in the
MENA region led by
higher economic activity
and energy prices
ures which were gradually wound up due to reviving growth also contributed to improving government balances. Saudi Arabia, for example, experienced a fiscal surplus of 6.7% of GDP in 2010
compared to a deficit of 6.1% in 2009. For the UAE, the deficit did not turn into a surplus, but the
magnitude improved to 2.7% of GDP from 12.4% over the same period. MENA oil importers on the
other hand are not expected to experience the same trends. In fact, for these countries as a
whole, the fiscal deficit is estimated to have deteriorated to 6.3% of GDP in 2010 from 5.4% a year
before. However, the deficit is set to improve for these countries next year. Lebanon however is
expected to follow in the footsteps of oil exporters – its fiscal deficit is estimated to have fallen to
6.3% of GDP last year from 8.5% a year before.
Stage is set for toning down of fiscal stimulus as overall growth takes effect
Reviving economic activity has set the stage for a rollback and toning down of stimulus measures
in MENA economies. Saudi Arabia, which had launched the largest fiscal stimulus package among
G20 countries (20% of GDP) during the global downturn, has already begun unwinding some of its
Saudi Arabia’s 2011
budget reveal an expenditure hike of 7.4% lower
than the 13.7% hike in
2010 budget
stimulus measures. For example, Saudi Arabia’s 2011 budget reveal an expenditure hike of 7.4%
from the previous year’s estimated amount. This is far lower than the 13.7% hike in budgeted expenditure for the 2010 budget over the one before that. It is also apparent that the budgeted expenditure for 2011 is 7.4% lower than the actual expenditure for 2010. This is not a surprise given
the fact that oil prices have revived, thereby sprucing up the oil sector of the economy and
through its linkages to the non-oil sector to the overall economic activity of the country. The same
is true of other oil exporting economies as well. These countries are expected to tone down expenditure growth, although support to critical projects like infrastructure and economic diversification
are not likely to be toned down any time soon. Even for MENA oil importers, reviving private sector business activity has meant reduced need for government support. For example, for Egypt,
reviving international trade has meant greater revenues from movement of ships through the Suez
Canal.
28
MENA Year Book - 2011
At the same time, private sector investment has also gone up, thereby lowering the need for continued widespread government support to the economy.
Inflation edges up in the region
Although renewed growth in MENA countries as well as in the wider world has propped up ecoThe IMF expects inflation
nomic sentiments in the region, rising price pressures seem to be emerging as an area of concern.
in the KSA to touch 5.5%
Much of this price pressure has come from the supply side with rising international commodity
in 2010 before moderat-
prices percolating into higher consumer prices. Saudi Arabia, for example, has seen inflation rise
ing slightly to 5.3% in
from about 3-4% in the fourth quarter of 2009 to about 5.8% in October 2010. The IMF expects
2011
inflation in the Kingdom to touch 5.5% in 2010 before moderating slightly to 5.3% in 2011. For the
GCC as a bloc, 2010 annual inflation is estimated at 4.2% and is unlikely to change this year.
Exhibit 27: Average annual inflation figures for the MENA region
20
16
12
8
4
0
2000-05
2006
2007
MENA Oil Exporters
2008
2009
MENA Oil Importers
2010e
2011f
GCC
Source: IMF
Inflation for oil exporters
as a bloc is set to decline
to 7.7% in 2011 from
9.3% in 2010
Among oil importers within MENA, Egypt would be concerned with rising prices and so would be
countries like Morocco and Tunisia. In Egypt, the IMF estimates inflation to have averaged 10.9%
in 2010. While a high base effect is expected to moderate the rate of increase in consumer prices,
the Fund nevertheless expects inflation to be about 9.5% for this year. Interestingly, while oil importers are expected to see inflation rise this year, inflation for oil exporters as a bloc is set to decline to 7.7% from 9.3% in 2010; nevertheless a shock from the supply side could force prices
higher at a much faster than anticipated rate.
29
MENA Year Book - 2011
Exhibit 28: Average annual inflation figures for Saudi Arabia, UAE and Egypt
20
15
10
5
0
2000-05
2006
2007
2008
2009
2010e
2011f
-5
KSA
UAE
Egypt
Source: IMF
Rising global food prices romp up imported inflation
Global food prices have risen sharply over the past year with natural disasters in major food proThe FAO Food Price In-
ducing nations like Australia, Russia and even those like Pakistan contributing to supply shortages.
dex, went up by 24.6%
The FAO Food Price Index, which measures the wholesale price of basic foods within a basket,
YoY in December 2010,
went up by 24.6% YoY in December 2010, up from 22.1% in the previous month. Apart from two
up from 22.1% in Novem-
months in between, annual growth in the index has been in double digits since November 2009.
ber 2010
Soaring food prices are perhaps the foremost area of concern for MENA countries, given that the
region imports more than half of its food needs (World Bank).
GCC countries in particular are heavily reliant on the rest of the world for their food consumption
with agriculture nearly absent due to arid climatic conditions. Consequently, they are often faced
with imported inflation as a result of rising commodity prices. As in the second half of 2010, these
countries faced a similar situation in mid-2008 when they experienced strong upward pressure on
consumer prices due to high global food prices.
Saudi Arabia's food price
inflation stood at 8%
while for Kuwait it was
close to 11% in 4Q2010
Saudi Arabia's food price inflation stood at 8% while for Kuwait the figure was close to 11% in the
final quarter of 2010. Although consumer prices in the UAE are considerably lower, inflation rose
at the fastest monthly pace in 11 months in August 2010 as food price inflation reached 4.2%.
Given that five of the six GCC economies are pegged to the US dollar, a weakening dollar and subsequent investor moves towards commodities since May 2010 has also been pushing the cost of
food imports higher.
30
MENA Year Book - 2011
Exhibit 29: Food related inflation for Egypt; YoY rise in the FAO food index
30
20
10
0
-10
Egypt -Food & Bev
Dec-10
Nov-10
Oct-10
Sep-10
Aug-10
Jul-10
Jun-10
May-10
Apr-10
Mar-10
Feb-10
Jan-10
Dec-09
Nov-09
Oct-09
Sep-09
-20
FAO food Index
Source: Central Bank of Egypt, FAO
Housing related inflation revives in some economies like Saudi Arabia
After witnessing weakening property prices throughout 2009, housing prices are seen reviving in
Housing costs, account-
Saudi Arabia once again. In fact, as economic recovery gathers momentum across the wider
ing for 18% of the Saudi
MENA region, price pressures are set to strengthen further in the housing segment. Housing costs
inflation basket, has
which accounts for 18% of the Saudi inflation basket has recorded a significant jump in recent
grown up 9% in Decem-
months, rising 9% in December 2010. The economy has a shortage of dwellings and increasing
ber 2010
domestic revenue along with rising personal income is likely to aggravate the pressure on rents
further. However, some of the measures taken by the government like increased expenditure on
affordable housing could ease housing prices in the near term.
Exhibit 30: Rising rent and food prices in Saudi Arabia prop up consumer prices
25
20
15
10
5
0
General Index
Food
Dec-10
Oct-10
Aug-10
Jun-10
Apr-10
Feb-10
Dec-09
Oct-09
Aug-09
Jun-09
Apr-09
Feb-09
Dec-08
Oct-08
Aug-08
Jun-08
Apr-08
Feb-08
Dec-07
Oct-07
-5
Housing
Source: SAMA
Though global downturn had reduced inflationary pressure across the region from the record high
of 2008, rising price pressure is once again seen in the oil exporting countries.
31
MENA Year Book - 2011
Housing and transporta-
Housing and transportation cost is steadily rising in the Arab economies. Although the growth
tion costs are gradually
outlook for the MENA region remains positive, inflation in the region is expected to rise further
rise in the Arab econo-
due to rising global food prices and shortage in residential housing. The recovery in domestic de-
mies
mand is likely to further push the prices northwards.
Money and credit markets
Like central banks across the world, those in the MENA region played a significant role in stabilizing money markets and boosting confidence in the banking sector. To a large extent, the GCC
countries (barring Kuwait) have had to keep tune with the loose monetary policies of the US Fed
The Central Bank of the
due to their currencies’ peg to the US Dollar. Even in Kuwait, the central bank almost always fol-
UAE, supported Dubai
lows Fed policies as the Kuwaiti Dinar is pegged to a basket of currencies where the US Dollar is
when the Emirate’s sov-
estimated to have a more than 80% share. While the mirroring of Fed policies had come under
ereign debt came under
severe criticism in mid-2008 when Gulf countries had to lower rates under rising inflation, the
threat in 2009-10
same policy helped them in stoke money supply growth and thereby provide boost to the economy during the downturn. However, this in no way takes the credit away from central banks in
these countries in their countering the credit crisis. Central banks across the GCC and in the wider
MENA region responded to the crisis by providing special liquidity windows, lowering reserve requirements and monitoring effectively the overall banking and financial sector. SAMA in particular
has come in for praise from analysts as they credited it with creating the right regulatory framework which helped the Kingdom avoid the pitfalls of a real estate bust as witnessed in neighboring
UAE. In all fairness to the Central Bank of the UAE, it had also reacted aggressively to the crisis and
perhaps its greatest achievement came in the form of support to Dubai when the Emirate’s sovereign debt came under threat in 2009-10.
Monetary policy remains moribund in the absence of any Fed movement
Post the crisis however monetary policy seems to have remained stagnant with not much moves
expected from GCC central banks. Interest rates are not expected to rise anytime soon even as
Monetary policies in the
inflation edges up in most economies. A large reason for this is the absence of any expected move-
GCC countries have re-
ment by the US Fed to tighten monetary policy this year. The Fed did not deviate (over 2010) of
mained stagnant due to
keeping its policy rate within the range of 0.0-0.25% and is not expected to do so in the near fu-
lack of policy movement
ture as well, especially with unemployment near double digits and any further fiscal stimulus look-
by the Fed
ing impossible. Instead, the Fed reacted recently with its second round of quantitative easing
worth USD 600 billion in order to drive investment and consumption. For other countries in the
MENA region which do not mirror the Fed, movement on monetary policy would be closely
watched. Some central banks would be aware of inflationary pressures in the economy, especially
with the threat of rising food and raw-material prices percolating down to overall consumer prices.
Egypt, for example, has the one of the highest interest rates in the region (11.4% in 2010) and the
central bank is expected to tighten policy over the current year as inflation continues to edge upward. After adopting a monetary loosening policy since January 2009, the pressure is back on the
Central Bank of Egypt to drive interest rates up. However, both governments and central banks
would be wary about doing so aggressively, especially with global growth facing downside risks of
subdued economic sentiments in Europe and inflation bubbles in Asia.
32
MENA Year Book - 2011
Exhibit 31: Liquidity has returned to money markets in 2010
5.0
4.0
3.0
2.0
1.0
0.0
Jan-09
Apr-09
3M LIBOR
Jul-09
Oct-09
3M SAIBOR
Jan-10
Apr-10
3M EIBOR
Jul-10
Oct-10
MOBRIM
Source: Bloomberg
Improvement in money market liquidity
Interbank offer rates in the MENA region have significantly eased from the high levels reached
M2 growth in Saudi Ara-
during the financial crisis of 2008 suggesting that overall confidence in the region’s money markets
bia, stabilized in 2010, up
have improved. The abundance of bank reserves and low interest rates regime in the region has
around 6% YoY after
ensured ample liquidity condition in these economies. Money supply in the MENA region im-
being on a downward
proved in 2010, which is likely to play an instrumental role in the region’s business cycle recovery.
trend since end-2008
A slow recovery in bank credit to the private sector has been a strong factor supporting the region’s domestic growth. As in many countries around the world, fiscal policy has been the main
support to pump in liquidity in the region. For example, in Saudi Arabia, broad money (M2) growth
stabilized in 2010, expanding at around 6% YoY after being on a downward trend since end-2008.
The primary reason for this was the lack of robust bank lending to the private sector as banks prefer to park money as reserves. However, government’s efforts to diversify and strengthen the nonoil private sector and to set up separate funds for easy availability of credit to the private sector
has fueled growth in the economy. Bank lending also remains in positive territory, registering a
growth of 2.6% YoY growth in November, indicating signs of revival. In the UAE, the government
tried to stabilize the economy by shifting the focus on investment opportunities away from real
estate and finance towards trade, logistics, aviation, and tourism. The government also encouraged the establishment of start-up companies by facilitating and cutting the cost of doing business.
33
MENA Year Book - 2011
Exhibit 32: M2 growth has picked up since the middle of 2010
25%
20%
15%
10%
5%
0%
Jan-09
May-09
Sep-09
KSA
Jan-10
May-10
Kuwait
Sep-10
Egypt
Source: Bloomberg
Is credit growth enough to stimulate sustainable consumption growth?
One of the major impacts of the global financial crisis on the Middle East and North Africa (MENA)
Credit growth in the
region has been a sharp slowdown in the region’s credit growth to the private sector. Most of
MENA region has picked
these countries (Qatar, the United Arab Emirates, Saudi Arabia) experienced a credit boom prior to
up from a low of over 4%
the crisis, wherein credit growth surpassed its historical trend by a sufficiently large amount. An-
in end-2009 to around
nual credit growth has picked up somewhat in the MENA region, with the outlook for private sec-
7% in June 2010
tor credit set to improve further on the back of recent progress on Dubai World's debt restructuring. According to analysts, credit growth in the MENA region has picked up from a low of just over
4% in end-2009 to around 7% in June 2010. However, it is still far away from the 32% growth
achieved right before the global financial crisis.
Exhibit 33: Credit growth has picked up once again in key MENA economies
45%
35%
25%
15%
5%
-5%
Jan-09
Apr-09
Jul-09
Lebanon (YOY)
Oct-09
Jan-10
Saudi (YoY)
Apr-10
Jul-10
Oct-10
Qatar (YOY)
Source: Bloomberg
34
MENA Year Book - 2011
Egypt is witnessing sig-
In Egypt, there has been a significant slowdown in credit growth for private sector activity. This
nificant slowdown in
would worry policymakers as reviving growth in the private sector is critical to sustain growth,
credit growth of private
especially in the wake of expected tightening of government budgets in the country. Credit to non-
sector
government entities has in fact been declining on a monthly basis since May 2010 with YoY growth
only a little over 1.0% in September 2010. In January 2010, YoY growth had stood at 8.2%.
Outlook for the MENA economy 2011
The upturn in global economic activity is expected to benefit the MENA region as countries gain
from improved fundamentals. While flow of investments from abroad are set to increase, greater
Oil exporters are set to
trade and financial flows are set to benefit private sector activity. At the same time oil exporters
record a 5.5% growth in
look set to garner the benefits of rising energy prices as global demand increases, backed by
real GDP in 2011, up
strong growth in emerging markets and increased pace of economic activity in the US. Conse-
from 3.8% in 2010
quently, oil exporters are set to record a 5.5% growth in real GDP in 2011, up from 3.8% in 2010.
Oil importers though are expected to see GDP growth decline to 4.4% this year, as governments
try to reign in deficits by reducing stimulus measures. Nevertheless growth is expected to prop up
in the coming years as countries improve their balance sheets and initiate greater reforms towards
encouraging the private sector. GDP growth for the MENA bloc is expected to go up to 4.6% in
2011 from 3.9% the year before.
Exhibit 34: IMF forecasts for GDP growth in key MENA economies
18.6
20
16
12
9.3
8
4.6 4.7
5.5 5.7
4.3 5.0
4.5 4.4
4.8 5.0
KSA
Tunisia
3.2
4
3.9
0
MENA
Egypt
Morocco
2011
Qatar
UAE
2012
Source: IMF
Post debt related fears, UAE is set to post strong growth in 2011
The UAE economy shook off negative vibes emerging from Dubai’s sovereign debt concerns and a
Oil real GDP for the UAE
real estate bust to post steady growth in 2010. Overall confidence in the economy received a shot
is set to rise 3.4% in 2011
in the arm with Dubai World’s debt restructuring plan winning the support of creditors in the sec-
to from 3.0% in 2010
ond half of 2010. The rise in oil prices was of course a key ingredient to growth last year and is set
to continue in 2011 as well. The country also drew the benefits of being a trade hub (especially
Dubai) as reviving world trade flows boosted its earnings from re-exports. Oil real GDP for the
country is set to rise further in 2011 to 3.4% from 3.0% in 2010. By complementing a growth of
3.1% in non-oil real GDP, overall GDP growth is set to rise to 3.2% in 2011 from 2.4% in 2010.
Growth however would continue to be lower than the average GCC growth of 5.1% in 2011.
35
MENA Year Book - 2011
Exhibit 35: Oil and non-oil GDP contribution in the UAE
100%
80%
64%
66%
67%
63%
36%
34%
33%
37%
2000-05
2006
2007
2008
60%
75%
71%
25%
29%
2009
2010E
40%
20%
0%
Oil GDP
Non-oil GDP
Source: UAE central bank
Expansion of the Saudi economy will continue to keep pace
Recent rise in oil prices is
Given the greater dependence of the Saudi Arabian economy on oil, the recent rise in oil prices is
likely to benefit the
likely to benefit the Saudi Arabia economy more than the UAE. While economic growth in the
Saudi Arabia economy
Kingdom increased to 3.8% in 2010 from 0.6% in 2009, this is set to increase further to 4.5% in
more than the UAE due
2011. While the oil sector is expected to grow at a pace of 4.3%, the non oil sector is expected to
to its greater depend-
grow at a rapid pace of 4.6% in 2011.
ence on oil
Exhibit 36: Government expenditure was critical in boosting non-oil growth in 2009-10
46
5.2
44.5
42.8
42
40.7
38
4.8
4.4
34.4
34
32.1
4.0
32.0
30.8
30
3.6
2005
2006
2007
2008
Government Expenditure (% of GDP)
2009
2010 E
2011 E
Non-oil real GDP growth (%)-RHS
Source: IMF
Saudi government is
increasing capital spending to the tune of
SAR741 billion in infrastructure projects to fuel
growth
Higher government spending to diversify the economy has been the main driver of growth in the
non-oil economy. The Saudi government in the last three budgets has focused on increasing capital expenditures to the tune of SAR741 billion in infrastructure projects to spur growth in the economy as private sector activity continues to remain weak given the slow growth in credit since the
end of 2008.
36
MENA Year Book - 2011
Going forward, expectations of higher oil prices, continued government spending, healthy monetary base and a low interest rate regime are expected to push the GDP growth rate to 4.5% in
2011. The hydrocarbon and the non hydrocarbon sectors are expected to grow at 4.6% and 4.3%,
respectively.
Strong growth expected for Qatar
Qatar has been the fastest growing economy in the world since quite some time now. In fact, even
Qatar expected to benefit immensely from its
huge natural gas reserves
when global downturn was at its peak in 2009, it grew at an astounding pace of 8.6%. Given
Qatar’s immense reserves of natural gas, the nation is likely to benefit immensely by the recent
uptrend in energy prices. According to the estimates of Qatar National Bank, the oil and gas sectors accounted for over half of Qatar’s GDP in 2010. The government has recently devoted more
resources to the development of new liquefied natural gas and gas-to-liquid technology production facilities thus setting the stage for sustainable high growth.
Given the expectations of a rise in oil and gas price, strong liquidity condition and the low interest
rates, the economy is poised to remain the fastest growing economy, with a GDP growth rate of
above 18% in 2011. In fact, the government’s massive spending plans to the tune of USD100 billion, around 87% of GDP, on non hydrocarbon mega projects is likely to increase the share of non
hydrocarbon sector to the nation’s nominal GDP to 49% in 2011.
Exhibit 37: Qatar has the highest oil real GDP growth (%) in MENA region
30
23
20
10
26
23
21
14
8
8
7
4 4 5
4
3
2
3
1
3 2
4 3 4
0
-1
-4 -3 -3
-10
-7
-10
-11
-20
2000-05
2006
Qatar
2007
2008
Oman
2009
UAE
2010E
2011F
Kuwait
Source: IMF
Outlook for key themes
Government debt set to decline; current accounts to strengthen
In oil exporting countries in the MENA region, a rise in oil revenues and a winding down of fiscal
Qatar expected to benefit immensely from its
huge natural gas reserves
stimulus measures would lead to a decline in government deficit and debt levels this year. In fact,
government debt which fell sharply in 2010 for these economies is set to decline further to 19.4%
of GDP in 2011. For GCC countries, government debt in 2011 is expected at 13.3%, down from
15.5% of GDP in the previous year. While the level of government debt in Saudi Arabia is expected
at 11.0% of GDP this year, for UAE the figure is likely to be 21.6%.
37
MENA Year Book - 2011
Government debt for
Oil importers are also set to witness a fall in government debt levels this year due to reviving
MENA oil importers is
growth. However, levels will continue to be higher than those of energy-rich peers in the region.
expected to decline to
As a whole, government debt for MENA oil importers is expected to decline to 62.0% of GDP in
62.0% of GDP in 2011,
2011, lower than the 63.5% figure for last year. While the figure for Egypt this year is expected at
lower than the 63.5% in
71.7% of GDP, for Lebanon it would still amount to more than GDP at 137.5%. However, continued
2010
instability due to political tensions could send debt levels higher as economic activity suffers and
governments are forced to raise expenditure in order to support growth.
Exhibit 38: General government debt is set to go down this year
100
89.6
75.4
80
60
69.1
64.7
63.9
63.5
62
49.7
40
29.9
24.3
21.1
27
21
19.4
20
0
2000-05
2006
2007
2008
Oil exporters
2009
2010e
2011f
Oil importers
Source: IMF
On the current account front, given the increase in oil prices the IMF estimates oil exporting counOil importing economies
are estimated to witness
a current account deficit
of 3.6% of GD Pin 2010
tries in the MENA region to witness a rise in their current-account surpluses. Overall, the current
account surplus for oil importers is expected to touch 7.8% of GDP in 2011, up from just 4.6% in
2009. Meanwhile, oil importing economies within the region are estimated to witness a current
account deficit of 3.6% of GDP this year.
Gulf Monetary Union not likely this year
One of the casualties of the global downturn of 2008-09 has been the Gulf Monetary Union
(GMU), which was expected to have seen the light of day in 2010. However, more than economic
Disagreements on a
more political level has
been stalling moves towards a common currency
reasons, it was the disagreements on a more political level that has been stalling moves towards a
common currency. The UAE’s sudden pullout from the proposed GMU had more to do with its
displeasure at not being chosen as the host nation for the common central bank for the union. At
present, no agreements appear to be in sight and Saudi Arabia does not look to be in any mood in
acceding to UAE’s wishes. At the same time, there is no probability of Oman moving back into the
GMU fold, although the country has been solid behind moves to strengthen and implement the
GCC customs union (in which it is still a member).
Currency peg is likely to continue
Just as a monetary union does not look probable in the near term, any change in monetary policy
is also not expected.
38
MENA Year Book - 2011
While 2007-08 witnessed repeated calls by economists for adopting a more flexible exchange rate
policy, this no longer seems to be the dominant cry. At that time, a weak US Dollar to which almost
all countries in the GCC peg their currencies had led to imported inflation while at the same time
rendering monetary policy ineffective in countering inflationary pressures. The problem was comprehended by different stage of the business cycle in the US and in the GCC with the US Fed (with
whom GCC central banks mirror policies due to the peg) slashing rates to stimulate growth while
inflation peaked in the GCC. However, the clamor for a change in the pegged exchange rate died
down with the global downturn with the Dollar regaining ground (given the attractiveness of US
Treasuries as a safest asset).
At the same time, any hopes of a move to peg GCC currencies (except Kuwait) to a basket of curGCC countries’ monetary
policy will continue to
remain dependent on the
US Fed
rencies have also died down. The Euro has suffered on account of instabilities in the Eurozone due
to the sovereign debt crisis in the region. In fact, critics have questioned the sustainability of the
Eurozone itself, though this does not seem likely. Consequently, GCC countries are not expected to
change from their fixed exchange rate regime any time soon and so their monetary policy will
continue to remain dependent on the US Fed. A review of policies would have been possible had
the GMU come into force or moves towards it would have gathered paced. In the absence of neither, no change in policy is expected. Even though Kuwait keeps its currency pegged to a basket,
the Dollar which is estimated to account for more than 80% is set to continue its dominance in the
basket.
Greater intensity in trade negotiations with other countries/ economic blocs
A number of countries are currently in trade negotiations with MENA economies. Trade between
Trade between the GCC
the GCC and China has increased 40% between 1999 and 2004, which led to a comprehensive free
and China grew 40%
trade agreement in June 2004. In April 2007, China and the UAE signed a memorandum of under-
between 1999 and 2004,
standing to strengthen economic relations between them. GCC economies are seen holding dia-
resulting into a free
logues with the ASEAN nations to establish free trade agreements (FTA) with them. So far the GCC
trade agreement in June
has signed a free trade agreement (FTA) with Singapore and is discussing similar agreements with
2004
Japan, India and Pakistan. The ongoing negotiations between the GCC and the EU are also likely to
gather pace, though a conclusive agreement does not look likely in the near term.
39
MENA Year Book - 2011
OVERVIEW OF MENA EQUITY AND DEBT MARKETS
Movements in MENA capital markets in 2010
Percolation of global and regional economic growth to equity markets
MENA countries’ impressive macroeconomic performance in 2010 led primarily by higher oil prices
From 5.0% in 2008,
as well as positive global economic environment translated into revival of the region’s capital mar-
growth for the MENA
kets. Most MENA equity markets recovered in the year with seven of the thirteen major regional
region more than halved
stock indices ending positive. However, this performance was hurt by several regional and interna-
to 2.0% in 2009
tional issues such as concerns regarding debt restructuring, inadequate corporate governance and
liquidity problems following the Dubai debt crisis. Moreover, uncertainty about the pace of global
economic recovery and the emergence of Eurozone debt crisis had an impact on regional stock
markets.
Exhibit 39: Performance of regional equity markets
78%
58%
38%
18%
-2%
-22%
Dec-09
Mar-10
ADX
Casablanca SE
Kuwait SE
Tunis SE
Apr-10
Jun-10
Ammam SE
Damascus SE
Muscat SE
Aug-10
Oct-10
Bahrain SE
Dubai FM
Qatar SE
Dec-10
Beirut SE
Egypt SE
Saudi SE
Source: Zawya
Relative performance of equity markets in the region
Seven major indices in the MENA region emerged strongly in 2010 and ended in the green. Syria’s
Damascus Securities Exchange index outperformed the regional indices and posted a 72% gain
over the past year. The country’s encouraging economic performance amid higher oil prices
boosted investor interest. Strong interest in initial public offerings (IPOs)—most of which were
Syria’s stock index out-
heavily oversubscribed—also supported the solid momentum in 2010. The stock market is, how-
performed the regional
ever, still in its nascent stage (in the second year of operation) with only 18 companies listed on
indices by gaining 72%
the exchange. Qatar recorded the strongest economic growth in 2010 globally; its DSM20 index
over the past year
surged 25% in the year. Buoyed by the uptrend in energy prices, the petrochemical and fertilizer
sectors grew remarkably during the year. The banking sector also posted robust performance,
thereby supporting the stock market rally. The news of Qatar’s winning bid to host the Football
World Cup 2022 came during late 2010; this further boosted investor sentiment.
40
MENA Year Book - 2011
Indices of Morocco’s Casablanca Securities Exchange and Tunisia’s Tunis Stock Exchange added
Higher energy prices
supported the growth in
petrochemical sectors in
some of MENA markets
21% and 18%, respectively, in 2010 due to encouraging economic performance. Egypt’s stock index posted a solid gain of 15% over the previous year. Strong performance by the country’s banking sector and positive outlook for the construction sector supported the rally. According to the
Finance Minister, Egypt aims to boost its annual infrastructure budget to EGP100 billion over the
next five years. Saudi Arabia’s TASI increased 8%, while Oman’s MSM30 added 6% in 2010. Strong
gains in Saudi Arabia’s petrochemical sector due to increased commodity prices led the rally. The
market heavyweight SABIC (Saudi Basic Industries Corporation) gained 27% over the previous year.
Oman benefited from high energy prices that supported growth in the energy sector, as well as
from robust gains in its banking sector.
Six MENA markets ended 2010 in the red. Lebanon’s Beirut stock market was the worst performer
Both DFM and ADX indi-
with a loss of 13% in the year. The market was hard hit by global selling pressures amid growing
ces underperformed the
uncertainties over the Eurozone debt crisis. Dubai’s Dubai Financial market index (DFM) followed,
market due to concerns
down 9.6% due to concerns over the Dubai debt crisis. Positive news on the Dubai World debt
over the Dubai debt crisis
restructuring came in September 2010; however, indices in both the UAE markets, Abu Dhabi Exchange (ADX) and DFM, closed negative as investors remained concerned over the financial health
of companies affected by the Dubai debt crisis and liquidity in the market. Two other GCC markets,
Kuwait and Bahrain, registered losses. The Kuwait stock market index was down 0.7% in 2010,
while the Bahraini market ended with a 1.8% loss over the previous year.
Sectors driving as well as weighing down markets
The banking and financial services sector emerged as the undisputed winner in MENA in 2010,
driven by strong returns in the banking sector in six of the nine markets covered in our analysis
(please refer exhibit 26). Egypt’s banking sector posting the strongest returns of 76%. The Qatari,
Kuwaiti and Moroccan banking sectors also registered robust gains during the year. Morocco’s
mining sector recorded the highest gain of 128%, while Qatar’s insurance sector added an impressive 68% over the past year.
Exhibit 40: Best performing sectors (by coun-
Exhibit 41: Worst performing sectors (by coun-
try), 2010
Services (MSM)
try), 2010
0%
Telecom (ADX)
7%
8%
Petroch (Saudi)
-11%
17%
Services (Qatar)
Banks (Muscat)
-16%
Real estate (Kuwait)
Consumer (DFM)
21%
-16%
Telecom (Egypt)
Hotels (Bahrain)
22%
-17%
Investment (Bahrain)
-17%
Beverages (Morocco)
Banking (Kuwait)
42%
Insurance (Qatar)
68%
Banks (Egypt)
-27%
77%
Mining (Morocco)
-46%
128%
0%
50%
100%
Media & Publ (Saudi)
150%
Real Estate (ADX)
-59%
-70%
Utilities (DFM)
-35%
0%
35%
Source: Respective exchange websites
41
MENA Year Book - 2011
The utilities sector on the DFM posted the largest loss of 59% in 2010. However, overall, real estate was the worst performing sector during the year with four of the nine markets covered reporting losses. The sector was hurt by some of the largest losses posted by the UAE developers
such as Aldar and Union Properties. As a result, the ADX real estate index recorded the highest
decline of 46% in 2010. Saudi Arabia’s media & publishing sector registered a loss as high as 27% in
the year.
Other key features pertaining to equity market
Has liquidity improved this year?
Thin liquidity conditions in the MENA region failed to exhibit much improvement, notably in the
UAE markets following the Dubai World debt crisis. The sell off followed by the news that government-owned Dubai Holdings is considering a six month debt freeze severely hurt market sentiment. Lack of information concerning the Dubai issue worsened conditions. The UAE markets,
which include the two domestic bourses DFM and ADX, were the worst performers among Gulf
The value of shares
peers as lack of institutional participation impacted liquidity. Turnover and trading volumes on the
traded on the DFM
DFM and ADX slumped since the 2008 financial crisis and debt issues among Dubai-based con-
dropped 59.8% YoY to
glomerates limited foreign institutional participation in the markets. A sharp fall in trading vol-
AED69.7 billion in 2010
umes caused equity brokerages in the region to struggle with low revenues and rising costs. The
value of shares traded on the DFM during 2010 declined 59.8% to AED69.7 billion compared to
AED173.5 billion in 2009. The number of shares traded decreased 65.3% to 38.4 billion shares
from 110.7 billion in 2009. The number of transactions executed during 2010 fell 60% to 0.79 million compared to 1.984 million deals the previous year. Similarly, the value of shares traded on the
ADX in 2009 fell 69.83% to AED69.98 billion from AED231.96 billion in 2008. This reflected the
liquidity pressures in the market. These conditions persisted in 2010 as the total value of shares
traded on the ADX declined 50.6% to AED34.58 billion over the past year. Stock markets in the
UAE require additional liquidity from government funds to counter slumping volumes and muted
investor activity. Sectors driving as well as weighing down markets.
Valuations
An analysis of PE and P/BV multiples of major MENA exchanges shows that there has not been a
Qatar, Egypt and Saudi
Arabia boast attractive
valuations due to relatively low multiples
major shift in terms of valuations. However, improvement in corporate performance has mostly
led to lower multiples. Qatar, Egypt and Saudi Arabia particularly look attractive. Qatar boasts the
second highest per capita income globally with a double-digit GDP growth estimate for 2011. Relatively low multiples in the country are likely to draw investors.
42
MENA Year Book - 2011
Exhibit 42: Market PE, 2009–10
14.7
14.4
11.6
12.6
Tunis
Saudi
Qatar
MSM
Kuwait
Egypt
DFM
Damascus
Casablanca
BSE
ADX
Ammam
Exhibit 43: Market P/BV, 2009–10
2010
2009
20.1
10.8
10.9
23.0
20.3
12.2
9.4
21.7
0
10
20
2.0
2.0
2.2
1.8
1.7
1.5
Tunis
Saudi
Qatar
MSM
Kuwait
Egypt
DFM
Damascus
Casablanca
BSE
ADX
Ammam
30
2010
2009
0.8
2.8
4.5
1.2
1.1
1.6
0
2
4
6
Source: Zawya
Debt market performance
Government contribution to debt market offerings in the year
As regional economies return to growth path and equity markets recover swiftly, debt markets in
According to MEED,
US$23.9 billion worth of
bonds were estimated to
be issued in MENA in
2010
the MENA region also stage a comeback. According to MEED, US$23.9 billion worth of bonds were
estimated to be issued in MENA in 2010. Qatar led with US$7billion worth bond issues, followed
by Dubai (US$4.3 billion). Debt markets exhibited a strong rebound from the events of 2009. Corporate and sovereign MENA bond yields declined during 2010 as market conditions improved and
Dubai World reached a restructuring deal with creditors for US$25 billion of debt. Corporations are
increasingly tapping the bond market as banks remain reluctant to lend. Besides, the popularity of
bonds as a vehicle to refinance maturing project loans is on the rise. Emaar Properties, the UAE’s
largest property developer, raised US$500 million through the sale of convertible bonds, while
Qatar Islamic Bank (QIB) received orders for US$6 billion as it sold US$750 million of Islamic debt.
Governments in the region are fast utilizing this instrument to finance big-ticket public infrastructure projects. The Dubai government sold US$1.25 billion worth of bonds in October 2010. In
terms of sukuk issuance, corporate sukuks staged an impressive recovery to seven in 2010 from
just three in the past year. On the contrary, sovereign and quasi-sovereign sukuk issuances during
the period dropped to 25 from 29 and one from two, respectively. Overall, debt markets in MENA
are recovering from the shockwaves of global and regional financial meltdowns with the encouraging signs of increased corporate sector participation.
43
MENA Year Book - 2011
Exhibit 44: Type of sukuk issued in MENA, 2006–10
32
29
26
26
25
24
24
21
14
16
14
7
8
3
2
2
2
2007
2008
2009
3
1
0
2006
Sovereign
Quasi Sovereign
2010
Corporate
Source: Zawya
Is the Dubai debt crisis still putting downward pressure on markets?
The Dubai debt crisis had a far-reaching impact on regional debt markets, primarily in terms of
Several bond issues were
downgraded in 2009 as
Dubai World delayed its
debt repayment plan
shaken creditworthiness of debt issuers in the region, thereby resulting in negative investor confidence. Several bond issues were downgraded in 2009 as Dubai World delayed its debt repayment
plan; this triggered concerns over the possibility of the largest default by a government since Argentina’s debt troubles in 2001. However, improved credit ratings on recent bond issuances by
state-owned companies indicate better creditworthiness in the region and a recovery in regional
debt markets after almost two years. Credit rating agencies recently upgraded the status of several
bonds issued by major state-owned companies such as the Dubai Electricity and Water Authority
(Dewa) and MB Petroleum, a major supplier of oil field services in Oman. In late October 2010,
Standard & Poor’s raised the rating on US$2 billion notes issued by Thor Asset Purchase, the Cayman Islands entity that issues debt for Dewa, to investment grade BBB- from junk status BB+. Improved credit rating is mainly ascribed to Dewa’s strong results in 1H2010 and better cash flow, as
stated in the ratings report.
MB Holding, a family-owned company in Oman, was newly assigned a B credit rating with a positive outlook and scope for an upgrade if a planned bond issuance proceeds well. The subsidiary
MB Petroleum Services received its own new rating—also with a positive outlook—for a proposed
US$350 million bond issue designed to extend its debt maturity profile and improve liquidity. The
subsidiary reported debt of about US$367 million as of June 30, 2010; however, Standard & Poor’s
said it believed that weaknesses were partly offset by the firm’s strong domestic position in
Oman’s oil field services sector.
Higher market liquidity
and increase in compa-
A subsidiary of International Petroleum Investment in Abu Dhabi, established specifically to issue
nies’ ability to refinance
US$2.5 billion in bonds, was assigned a solid AA rating led by the company’s affiliation with the
debt portfolios are posi-
Abu Dhabi government. Thus, improvements in market liquidity and increase in companies’ ability
tively impacting credit-
to refinance debt portfolios with higher corporate results are positively impacting creditworthiness
worthiness in the region
in the region.
44
MENA Year Book - 2011
Is a sukuk revival underway?
The number of sukuk issuances in the MENA region reduced to 33 in 2010 from 34 the previous
year. However, this decline is less steep compared to the 2008–09 period, thereby indicating that
recovery is underway. By country, Malaysia continued to dominate the global sukuk market with
72.3% of the total issuance value in 9M2010, followed by Indonesia (10.3%) and Saudi Arabia
Global sales of Islamic
bonds are forecast to rise
around 60% to more
than US$22 billion in
2011
(9.1%). An upswing in corporate spending, growing number of issuers seeking to diversify their
sources of funding and improving investor sentiment in the region are expected to drive fundraising activities in 2011. According to Reuters’ quarterly poll, global sales of Islamic bonds are forecast to rise around 60% to more than US$22 billion in the year. Qatar Islamic Bank and National
Bank of Abu Dhabi launched sukuk sales in recent months; the Dubai government, Saudi Arabia’s
civil aviation authority, Gulf Investment Corporation and Saudi International Petrochemical Company are also expected to enter the market. A major chunk of sukuk issuance in 2011 is likely to
emerge from issuers in Malaysia and the Middle East, while the US, Singapore and Indonesia are
also expected to contribute. Banks, governments and companies in the infrastructure, real estate
and energy businesses are likely to be the main issuers.
Exhibit 45: Total Number and value of Sukuk issued in MENA region, 2006-2010
32
29
26
26
25
24
24
21
14
16
14
7
8
3
2
2
2
2007
2008
2009
3
1
0
2006
Sovereign
Quasi Sovereign
2010
Corporate
Source: Zawya
Outlook for equity markets in 2011
Sectors to watch out for
Education
MENA is fast realizing the need to invest in its education sector as the shortcomings of unavailabilThe equation industry in
ity of skilled personnel seems to limit its diversification initiatives. The region’s growing focus to
Saudi Arabia is the larg-
upgrade the education sector offers lucrative growth opportunities. According to a research report
est in the GCC region
“Saudi Arabia Education Forecast to 2013”, the equation industry in Saudi Arabia is the largest in
GCC and is growing at one of the fastest rates among prominent education hubs in the Middle
East. The budget allocation for education and manpower development in Saudi Arabia reached
SAR137.6 billion in 2010 from just SAR96.7 billion in 2007.
45
MENA Year Book - 2011
The sector has been consistently capturing more than 25% share of KSA’s total budget expenditure, which is among the highest in the world. Besides Saudi Arabia, other GCC and MENA countries are increasingly investing in the education sector in MENA, thereby boosting its outlook in the
near term.
Healthcare
Lifestyle as well as social & cultural changes and growing standard of living in the MENA region are
causing modifications in food habits, thereby increasing the incidences of lifestyle-related ailPharmaceutical market
in KSA is forecasted to
increase at a CAGR of
5.66% from 2008 to
US$3.49 billion by 2013
ments. This has led to a rise in diabetes and cardiovascular and obesity-related illnesses to record
levels, putting further pressure on regional healthcare providers. According to organizers of the
36th Arab Health Congress and Exhibition, healthcare spending in the Middle East is expected to
triple to US$60 billion annually and hospital bed count is estimated to double to 162,000 over the
next 15 years. Moreover, Saudi Arabia ranked the largest among 17 healthcare markets across the
Middle East and Africa, establishing KSA as one of the most lucrative healthcare markets. Its pharmaceutical market alone is forecasted to increase at a compound annual growth rate (CAGR) of
5.66% to US$3.49 billion by 2013 from US$2.65 billion in 2008. Hence, the overall outlook for the
MENA region’s healthcare sector appears bright in the coming years.
Alternative energy
Alternative energy represents another lucrative investment opportunity in MENA, given the region’s increased focus to develop substitutes for traditional energy sources. As conventional energy becomes increasing scarce and unaffordable, its preservation is especially important for
MENA countries considering their huge economic dependence on hydrocarbon reserves. Countries
across the region are actively looking to implement energy efficient systems, and have even conducted studies in the field of renewable energy resources as well as in the implementation of energy saving systems in street lighting, water pumping stations and for electricity generation. Several MENA countries have set targets to achieve renewable energy generation in the coming years,
thereby attracting greater investment and enhancing the sector’s outlook in future.
Outlook for debt markets in 2011
Will the government and/or public sector continue to drive debt markets?
Huge infrastructure and development needs in MENA are expected to drive governments across
Huge infrastructure and
the region to raise funds efficiently and cost-effectively—mainly through debt markets. As GCC
development needs in
countries invest heavily in infrastructure, which according to estimates requires about US$2.3
MENA to drive govern-
trillion in financing, it is opportune to raise this funding through debt securities. However, there
ments raise funds
has also been higher corporate interest in the regional debt market. This is because the debt mar-
through debt markets
ket emerged as an attractive financing alternative in the wake of the financial crisis when access to
liquidity was limited and bank lending almost ceased. Losses in MENA equity markets and the prohibitive cost of long-term bank borrowing amid the global liquidity crunch have also supported a
substantial increase in debt market activity.
46
MENA Year Book - 2011
Hence, there has been a significant rise in demand for the Middle East corporate bonds from institutional and high net worth investors. Relatively faster economic recovery in the region combined
with improving risk appetite of portfolio investors is driving demand for emerging market bonds.
Hence, although we believe large-scale public sector investments are expected to play a crucial
role in the near-term debt market development, corporate sector participation in the overall debt
market is on the rise.
Outlook for sovereign risk
Energy price stability,
strong banking sector
asset growth and significant new capital investments reduce risk component for MENA
A broadly positive macroeconomic outlook coupled with improving investor sentiment for global
emerging markets stands to benefit the MENA economies going forward. Energy price stability,
strong banking sector asset growth and significant new capital investments are among other positives. There may be some risk to ability to pay as adverse financing conditions could result in lower
-than-expected real GDP growth forecasts. However, the impact on global emerging markets is less
severe than initially assumed, as evidenced by the rapid bounce in MENA markets.
Scenario for secondary trading
The MENA region’s secondary debt market is still developing as reflected from its small presence—
The bond market has
moreover, only in certain MENA countries such as Saudi Arabia and the UAE. Lack of trading activ-
been highly inaccessible
ity clearly reflected from the sukuk and bond trading trend on Tadawul has restricted growth of
to regional retail inves-
this market in MENA. Several factors together make it a strong case to develop the secondary
tors due to lack of secon-
bond market in the region. Institutional investors have typically been able to invest in MENA bond
dary trading platforms
issuances so far. The bond market has been highly inaccessible to regional retail investors due to
lack of secondary trading platforms. Furthermore, volumes are extremely low even in exchanges
where bonds are traded. The development of an efficient secondary bond trading platform could
lead to better price discovery of fixed income instruments. In addition, the mix of bonds with different maturity profiles would assist in creating a yield curve, which the region lacks currently.
47
MENA Year Book - 2011
Exhibit 46: Key Performance Indicators
Current
PE
Current
PB
Al Rajhi Bank
3.98
18.39
3.75
NA
57.04
22.55
3M Avg.
Daily
Volume
(mln)
1.52
Almarai Co
3.94
20.00
2.16
21.06
16.15
18.95
0.30
Attijariwafa Bank
3.45
14.04
1.41
NA
25.90
17.97
0.13
54.4
15.6
Barwa Real Estate Co
1.37
9.68
5.58
NA
34.48
11.02
1.75
27.2
27.6
Name of the company
Dividend EBIT mar- Net marROE (%)
Yield (%)
gin (%)
gin (%)
Price
change 1
year (%)
Benchmark
Index change
1 year (%)
7.1
1.6
18.3
1.6
Commercial Bank of Qatar
1.62
12.69
7.79
NA
43.31
10.05
0.31
39.5
27.6
Commercial International Bank Egypt
2.70
13.93
2.06
NA
44.86
20.37
1.65
15.0
(14.3)
DP World
1.52
21.86
135.54
17.64
14.38
5.04
7.09
48.5
1.7
NA
4.56
NA
26.86
19.19
NA
11.26
3.9
(1.7)
Emaar Properties
Etihad Etisalat
2.43
9.18
3.72
27.20
32.63
39.40
1.44
16.7
1.6
Emirates Telecommunications
2.38
11.19
3.14
17.29
21.05
18.87
0.99
4.7
(1.7)
First Gulf Bank
1.01
6.46
2.76
NA
54.94
14.52
0.64
8.5
(1.7)
Industries Qatar
4.06
11.74
3.37
43.02
46.94
29.48
0.41
31.1
27.6
Masraf Al Rayan
2.50
11.83
0.00
NA
87.17
17.20
2.96
88.0
27.6
Mobile Telecommunications Co
2.09
22.59
12.32
34.65
26.54
12.33
7.84
16.9
(11.8)
National Bank of Kuwait
2.20
16.35
2.86
NA
62.08
14.75
3.31
26.3
(11.8)
Orascom Construction Industries
2.81
18.01
5.24
15.36
12.54
20.14
0.19
14.1
(14.3)
Qatar Electricity & Water Co
5.15
10.57
4.64
40.00
38.63
41.01
0.08
30.7
27.6
Qatar Islamic Bank
2.04
12.99
5.78
NA
87.21
19.20
0.39
6.2
27.6
Qatar National Bank
2.92
12.70
3.57
NA
71.86
26.53
0.22
48.3
27.6
Rabigh Refining & Petrochemicals Co
2.77
94.23
NA
-0.24
0.41
2.64
2.72
(25.8)
1.6
Riyad Bank
1.35
14.13
4.96
NA
51.40
10.62
0.46
(3.9)
1.6
Saudi Basic Industries Corporation
2.58
14.56
1.45
24.94
22.12
19.76
4.61
18.5
1.6
Saudi Arabian Fertilizers Co
6.75
13.62
9.39
69.19
78.73
62.51
0.21
37.4
1.6
Samba Financial Group
2.07
12.43
3.06
NA
57.77
14.21
0.28
3.9
1.6
Saudi Arabian Mining Co
1.38
NA
NA
4.90
-34.12
-1.56
4.50
43.7
1.6
Saudi Electricity Co
1.16
25.37
4.96
6.58
-4.54
-2.33
3.61
24.1
1.6
Saudi Kayan Petrochemical Co
1.85
NA
NA
NA
N/A
-0.11
10.97
2.7
1.6
Savola Group
2.11
18.04
NA
2.63
0.36
0.11
0.60
(19.8)
1.6
Telecom Egypt
1.01
9.31
4.68
22.84
18.41
11.46
0.75
26.6
(14.3)
Yanbu National Petrochemicals Co
3.56
16.01
NA
28.69
29.32
31.50
1.94
21.6
1.6
Source: Reuters Knowledge
48
MENA Year Book - 2011
COMPANY PROFILES
Al Rajhi Bank
Key statistics
Shareholding
Sector: Banking
Price – 16 Feb 2011
SAR78.75
Public
50.10%
Sulaiman A. S. Al Rajhi
19.90%
Market Cap (mn)
SAR118, 125.00
Saleh A. S. Al Rajhi
14.20%
Price 52wk High/Low
SAR86.50/72.00
Foreign ownership limit
49.00%
Ticker: Bloomberg/
Reuters
RJHI:AB/ 1120.SE
Shares Outstanding
1,500.00 mn
Exhibit 47: Share Price Chart – 1 year (in SAR)
85
80
75
70
65
Feb-10
Apr-10
Jul-10
Sep-10
Nov-10
Feb-11
Source: Zawya
Business Description
Riyadh-based Al Rajhi Bank, founded in 1957, is one of the largest Islamic banks in the world. The
banks has a 13% market share by total assets (SAR170 billion or US$45 billion) in Saudi Arabia. Al
Rajhi is engaged in banking and investment operations in accordance to the Sharia principles.
The bank offers its services through two divisions: Personal Segment (accounting for 69.6% of the
total revenues) and Business Segment (contributing the rest). The Personal division covers current
accounts, affluent accounts, and private accounts through its Accounts sub-division as well as car
finance, real estate finance, personal finance, and credit cards through its Financing Solutions subdivision. The Business division offers cash management, finance products, small- to medium-sized
enterprises (SME), and trade finance products through its Corporate Banking sub-division as well
as treasury services through its Treasury sub-division.
Al Rajhi has a network of over 500 branches, over 100 dedicated ladies branches, more than 2,500
ATMs, 18,000 POS terminals installed with merchants, and 130 remittance centers worldwide.
49
MENA Year Book - 2011
The bank offers its products and services in Saudi Arabia, Latin America, North America, Europe,
Africa, and Asia-Pacific.
Financial performance
For the nine months ended September 30, 2010, Al Rajhi's gross finance income (GFI) increased
1.4% to SAR6.9 billion owing to an 11.3% higher GFI from retail, a 5.8% rise in corporate GFI, and a
66.6% up in the GFI of investments, offsetting a 66.9% decrease in treasury GFI. Total customer
deposits and other customer accounts went up 13.2% y-o-y to SAR141.6 billion and total finance
provided increased 5.4% y-o-y to SAR119.3 billion. Total operating income rose 0.5% marginally to
SAR8.8 billion for the nine months ended in 2010 due to an increase in other operating income
and exchange income, offsetting lower investment income. Net income fell 3.7% to SAR5.1 billion
owing to a lower operating income, and a rise in depreciation and amortization, and general and
administrative expenses.
Comments/Outlook
The bank intends to expand into new geographic markets. In August 2010, Al Rajhi established a
branch in Kuwait, where it provides all banking products and services to individuals and companies. In the same year, the bank has completed all the official approvals to carry out banking activity in the Kingdom of Jordan; this will be the third market Al Rajhi enters after Malaysia and Kuwait
in the framework of plans for overseas expansion according to its strategy. The bank is currently
working on the selection and processing of a number of branches that will be distributed to the
cities in Jordan. Al Rajhi aims to add 90 new branches during 2010–12, and to have 546 branches
by 2012. The bank’s asset quality remains healthy; the loan loss provisions as a percentage of gross
loans increased marginally for the nine months ended at September 30 from 0.89% in 2009 to
0.91% in 2010.
Financials
Exhibit 48: Income Statement (in SAR million)
2006
2007
2008
2009
9M2010
10,342
10,182
11,504
12,076
8,967
Interest on Deposit
0
0
0
0
0
Interest on Other Borrowings
0
0
0
0
0
Others
0
0
0
0
0
Total Interest Expense
0
0
0
0
0
10,342
10,182
11,504
12,076
8,967
253
443
1,227
1,761
1,362
Interest Income, Bank
Net Interest Income
Loan Loss Provision
Net Interest Inc. After Loan Loss Prov.
10,089
9,739
10,277
10,315
7,605
Non-Interest Expense, Bank
(2,788)
(3,290)
(3,750)
(3,548)
(2,502)
7,302
6,450
6,527
6,767
5,103
Net Income Before Taxes
Provision for Income Taxes
Net Income After Taxes
0
0
0
0
0
7,302
6,450
6,527
6,767
5,103
Source: Reuters Knowledge
50
MENA Year Book - 2011
Exhibit 49: Balance Sheet (in SAR million)
Cash & Due from Banks
Other Earning Assets, Total
Net Loans
Property/Plant/Equipment, Total - Gross
Accumulated Depreciation, Total
Property/Plant/Equipment, Total - Net
Total Assets
Accounts Payable
2006
2007
2008
2009
9M2010
11,415
14,842
15,108
13,390
5,156
2,209
2,578
3,110
2,562
22,974
89,563
104,876
142,287
151,595
150,126
3,244
4,040
4,663
4,919
0
(1,223)
(1,449)
(1,795)
(1,737)
0
2,022
2,591
2,868
3,182
3,267
105,209
124,887
163,373
170,730
181,523
2,360
0
0
0
0
79,012
95,349
126,643
128,964
146,705
Other Bearing Liabilities, Total
1,875
1,875
1,875
0
Other Liabilities, Total
1,782
4,056
7,824
13,025
5,802
85,029
101,280
136,341
141,989
152,507
6,750
13,500
15,000
15,000
15,000
13,430
10,106
12,032
13,741
14,016
Total Deposits
Total Liabilities
Common Stock, Total
Retained Earnings (Accumulated Deficit)
Total Equity
Total Liabilities & Shareholders' Equity
20,180
23,606
27,032
28,741
29,016
105,209
124,887
163,373
170,730
181,523
Source: Reuters Knowledge
Exhibit 50: Cash Flow Statement (in SAR million)
2006
2007
2008
2009
9M2010
9,993
19,880
2,849
5,203
4,609
Cash from Investing Activities
(10,093)
(16,626)
(630)
(619)
(344)
Cash from Financing Activities
(450)
(2,700)
(2,550)
(6,375)
(4,500)
Net Change in Cash
(550)
553
(331)
(1,791)
(235)
Net Cash - Beginning Balance
6,850
6,300
6,853
6,522
16,113
Net Cash - Ending Balance
6,300
6,853
6,522
4,731
15,878
Cash from Operating Activities
Source: Reuters Knowledge
51
MENA Year Book - 2011
Almarai Co
Key statistics
Shareholding
Sector: Agriculture & Food Industries
SAR102.75
Price – 16 Feb 2011
Market Cap (mn)
SAR23,632.50
Price 52wk High/Low
SAR117.00/84.25
Ticker: Bloomberg/
Reuters
ALMARAI AB/2280.SE
Savola Group Company
29.90%
HH Prince Sultan Bin
Mohammed Bin Saud Al
Kabir
28.60%
Public
27.41%
Foreign ownership limit
49.00%
Shares Outstanding
230.00 mn
Exhibit 51: Share Price Chart – 1 year (in SAR)
120
110
100
90
80
Feb-10
Apr-10
Jul-10
Sep-10
Nov-10
Feb-11
Source: Zawya
Business Description
Almarai Company, established in 1976, is a Saudi-based company engaged in the production and
distribution of consumer food and beverage products.
The company's main business segments are Dairy & Juice, Bakery, Poultry, and Arable and Horticulture. The dairy, fruit juice and related food business is operated under the brand name Almarai;
products are manufactured in Saudi Arabia and the UAE. Bakery products are manufactured and
traded by Western Bakeries Company Limited and Modern Food Industries Limited under the
brand names L'usine and 7 Days, respectively. Poultry products are manufactured and traded by
Hail Agricultural Development Company (HADCO) under the brand name ALYOUM. Almarai acquired Western Bakeries in 2007 and HADCO in 2009.
Saudi Arabia contributes more than 70% to the company’s revenues, followed by the UAE (10.5%),
Kuwait (5.8%), Oman (5.0%), Qatar (4.3%) and Bahrain (2.3%).
52
MENA Year Book - 2011
Financial performance
Almarai’s revenues rose 18.1% y-o-y to SAR6,930.9 million in 2010, mainly driven by the growth in
poultry products (295.8%), bakery products (32.9%), fruit juices (20.2%), and long-life dairy products (17.1%). The company’s gross profit margin fell 40 basis points to 39.5% in 2010, led by higher
raw material costs (particularly feedstock and juice concentrate). Almarai’s net income increased
17.2% to SAR1,285.4 million in 2010 compared to the previous year. As a result, the company’s
EPS stood at SAR5.59 for 2010 versus SAR4.97 in 2009.
Comments/Outlook
Almarai is targeting annual turnover of SAR15.0 billion by 2015. To achieve this goal, the company
would need to expand its top line at a CAGR of 17.0% over the next five years. Almarai recorded a
CAGR of 25.9% in top line over 2006–10. The company would primarily focus on the Dairy & Juice
and Bakery businesses to achieve this growth. In 2010, sales of Dairy & Juice business stood at
SAR5,910.1 million, while that of Bakery business stood at SAR873.1 million.
The company’s management expects the feed, packaging, dairy commodities and juice input costs
to remain high in 2011. It plans to closely monitor this situation, going forward. The management
may increase prices in an attempt to mitigate the impact of higher costs.
Financials
Exhibit 52: Income Statement (in SAR million)
2006
2007
2008
2009
2010
Total Revenue
2,757
3,770
5,030
5,869
6,931
% Change
28.5%
36.7%
33.4%
16.7%
18.1%
Cost of Sales
1,682
2,277
3,031
3,503
4,195
Gross Profit
1,075
1,493
1,999
2,366
2,736
39%
40%
40%
40%
39%
540
713
938
972
1,132
0
0
0
114
144
0
0
0
0
0
Operating Income
535
781
1,061
1,279
1,460
Margin %
19%
21%
21%
22%
21%
0
0
0
(2)
(6)
Other, Net
(56)
(95)
(125)
(148)
(121)
Net Income Before Taxes
479
686
935
1,129
1,333
Margin %
Selling/General/administration expenses
total
Depreciation/Amortization
Other Operating Expenses, Total
Interest Inc.(Exp.),Net-Non-Op., Total
Provision for Income Taxes
14
18
25
29
26
Net Income After Taxes
465
668
911
1,100
1,307
Net Margin %
17%
18%
18%
19%
19%
(0)
(1)
(1)
(3)
(22)
Minority Interest
Net Income
465
667
910
1,097
1,285
EPS
2.32
3.06
4.18
4.97
5.59
Source: Reuters Knowledge
53
MENA Year Book - 2011
Exhibit 53: Balance Sheet (in SAR million)
2006
2007
2008
2009
2010
68
138
247
508
241
Total Receivables, Net
150
252
319
376
443
Total Inventory
431
734
1,097
1,219
1,299
71
115
91
79
170
6
1
7
0
7
Cash and Short Term Investments
Prepaid Expenses
Other Current Assets, Total
Total Current Assets
726
1,240
1,760
2,182
2,160
4,352
5,739
7,386
10,205
12,174
(1,306)
(1,697)
(2,043)
(3,188)
(3,538)
3,046
4,041
5,343
7,017
8,636
Goodwill, Net
0
549
549
793
793
Long Term Investments
0
471
489
963
958
Property/Plant/Equipment, Total - Gross
Accumulated Depreciation, Total
Property/Plant/Equipment, Total - Net
Other Long Term Assets, Total
0
35
40
32
24
3,772
6,336
8,181
10,987
12,571
Accounts Payable
234
362
350
428
646
Accrued Expenses
157
196
0
0
0
Notes Payable/Short Term Debt
111
182
511
396
546
Total Assets
Other Current liabilities, Total
Total Current Liabilities
Long Term Debt
Minority Interest
Other Liabilities, Total
13
28
428
617
687
514
768
1,289
1,440
1,878
1,277
2,409
3,133
3,981
4,301
0
0
14
17
52
82
105
128
166
206
Total Liabilities
1,874
3,282
4,564
5,604
6,438
Common Stock, Total
1,000
1,090
1,090
1,150
2,300
0
612
612
1,601
1,601
Additional Paid-In Capital
Retained Earnings (Accumulated Deficit)
898
1,351
1,915
2,632
2,233
Total Equity
1,898
3,053
3,617
5,383
6,134
Total Liabilities & Shareholders' Equity
3,772
6,336
8,181
10,987
12,571
Source: Reuters Knowledge
Exhibit 54: Cash Flow Statement (in SAR million)
2006
2007
2008
2009
2010
630
740
1,016
1,802
2,005
Cash from Investing Activities
(824)
(1,488)
(1,572)
(1,711)
(2,189)
Cash from Financing Activities
221
818
665
170
(84)
Cash from Operating Activities
Foreign Exchange Effects
0
0
0
0
0
Net Change in Cash
26
70
109
261
(267)
Net Cash - Beginning Balance
42
68
138
247
508
Net Cash - Ending Balance
68
138
247
508
241
Source: Reuters Knowledge
54
MENA Year Book - 2011
Attijariwafa Bank
Key statistics
Shareholding
Sector: Banking
MAD424.50
Price – 16 Feb 2011
Market Cap (mn)
MAD81,898.50
Price 52wk High/Low
MAD480.00/269.00
Ticker: Bloomberg/
Reuters
ATW MC/ATW.SE
Groupe ONA
15.24%
Financière
d'Investissements
Industriels et Immobiliers
14.74%
Public
14.24%
Foreign ownership limit
100.00%
Shares Outstanding
193.00 mn
Exhibit 55: Share Price Chart – 1 year (in MAD)
500
450
400
350
300
250
200
Feb-10
Apr-10
Jul-10
Sep-10
Nov-10
Feb-11
Source: Zawya
Business Description
Morocco-based Attijariwafa Bank is a financial and banking group having a network of 1,874
branches, 4.3 million customers and operations in 22 countries, including France, Belgium, Spain,
Italy, Germany, Tunisia and Senegal. Its banking activities include personal and professional banking, corporate banking, investment banking and international banking. Attijariwafa Bank also offers real estate investment guidance, insurance and banking services through its subsidiaries such
as Wafa Immobilier, Wafa Assurance, Wafasalaf, Wafabail, Wafacash, Wafa LLD and Attijari Factoring Maroc.
Attijariwafa Bank is Morocco’s largest bank and the third-largest in Africa. It was established in
September 2004 after a merger between Banque Commerciale du Maroc and Wafabank. The bank
had 12,817 employees as of June 2010. It operates through a network of 615 ATMs and 624
branches in Morocco.
55
MENA Year Book - 2011
Financial performance
For the six months ended 30 June 2010, Attijariwafa Bank's total interest income grew 12.9% y-o-y
to MAD6.8 billion, driven by increased volume of loans granted to clients and financial institutions.
Net interest income after loan loss provision grew 27.5% y-o-y to MAD3.9 billion. Net income rose
15.1% y-o-y to MAD1.9 billion, benefitting from higher fees and commissions income, and operating non-banking income.
Comments/Outlook
The Attijariwafa Bank group plans to increase its presence in West Africa by opening new
branches. It is also looking to expand in Europe and enhance its reputation as one of the most
reliable and flexible banks in the region. Growing consumer spending and inward investment have
bolstered Morocco's economy in recent years, which has been further boosted by state-backed
infrastructure projects and tourism. The bank has strategic plans in place for 2012, where it focuses on developing the network of retail banking in Morocco, improving small-sized enterprise
management and financing of small enterprises, and consolidating its leadership position in the
field of investments, corporate and investment banking. The bank also aims to position itself as a
facilitator of economic and social development, establish new service quality standards, and grow
internationally with focus on the African continent.
Financials
Exhibit 56: Income Statement (in MAD million)
2006
2007
2008
2009
1H2010
Interest Income, Bank
7,163
8,695
11,177
12,298
6,747
Total Interest Expense
2,554
3,121
4,215
4,930
2,494
Net Interest Income
4,609
5,574
6,963
7,369
4,253
Loan Loss Provision
Net Interest Inc. After Loan Loss Prov.
3
659
632
988
330
4,607
4,915
6,330
6,380
3,923
Non-Interest Income, Bank
5,649
6,420
7,635
9,602
4,534
Non-Interest Expense, Bank
(6,393)
(7,420)
(8,466)
(9,115)
(5,053)
Net Income Before Taxes
3,863
3,915
5,500
6,868
3,404
Provision for Income Taxes
1,471
1,165
1,862
2,277
1,128
Net Income After Taxes
2,392
2,750
3,637
4,591
2,276
Minority Interest
(124)
(295)
(519)
(650)
(335)
Net Income
2,267
2,454
3,118
3,941
1,941
EPS (Basic)
11.75
12.72
16.16
20.42
10.06
Source: Reuters Knowledge
56
MENA Year Book - 2011
Exhibit 57: Balance Sheet (in MAD million)
Cash & Due from Banks
Total Investment Securities
2006
2007
2008
2009
1H2010
15,589
16,793
15,730
13,937
14,509
19,984
20,827
25,844
26,130
24,732
113,097
140,764
179,176
206,234
214,812
Property, Plant and Equipment, Total - Net
2,972
3,283
4,330
4,490
4,378
Goodwill, Net
3,890
4,091
5,055
6,409
6,382
589
763
903
1,223
1,281
90
88
94
98
-
Net Loans
Intangibles, Net
Long Term Investments
Other Long Term Assets, Total
727
684
781
732
805.11
25,612
24,618
27,030
31,094
30762.82
Total Assets
182,550
211,911
258,942
290,347
297,660
Total Deposits
144,415
164,176
201,950
220,910
223,431
1,226
2,789
4,673
6,761
7,279
404
3,337
6,433
8,272
9,544
1,637
1,232
1,462
1,499
1,724
Other Assets, Total
Other Bearing Liabilities
Long Term Debt
Deferred Income Tax
Minority Interest
124
295
519
650
334.94
Other Liabilities
19,651
23,133
25,171
31,096
33,420
Total Liabilities
167,458
194,964
240,208
269,189
275,734
Common Stock
7,367
7,367
7,367
7,367
7,367
Retained Earnings (Accumulated Deficit)
6,681
8,310
10,410
13,091
13,775
Other Equity
1,045
1,271
957
701
784
Total Equity
Total Liabilities & Shareholders' Equity
15,093
16,948
18,734
21,158
21,925
182,550
211,911
258,942
290,347
297,660
2009
1H2010
Source: Reuters Knowledge
Exhibit 58: Cash Flow Statement (in MAD million)
2006
2007
2008
Cash from Operating Activities
1,511
(301)
(7,310)
1,107
(4,217)
Cash from Investing Activities
(567)
(828)
(2,920)
(2,857)
(670)
Cash from Financing Activities
(1,166)
3,524
3,966
2,978
522
(0)
(12)
38
13
87
Foreign Exchange Effects
Net Change in Cash
(222)
2,383
(6,225)
1,241
(4,278)
Net Cash - Beginning Balance
19,761
19,539
21,922
15,697
16,938
Net Cash - Ending Balance
19,539
21,922
15,697
16,938
12,660
Source: Reuters Knowledge
57
MENA Year Book - 2011
Barwa Real Estate Co
Key statistics
Shareholding
Sector: Real Estate
QAR35.50
Price – 16 Feb 2011
Market Cap (mn)
QAR13,813.76
Price 52wk High/Low
QAR41.4/26.6
Ticker: Bloomberg/
Reuters
BRES QD/BRES.SE
Public
55.00%
Qatari Diar Real Estate
Investment Company
45.00%
Foreign ownership limit
25.00%
Shares Outstanding
389.12 mn
Exhibit 59: Share Price Chart – 1 year (in QAR)
45
40
35
30
25
20
Feb-10
Apr-10
Jul-10
Sep-10
Nov-10
Feb-11
Source: Zawya
Business Description
Barwa Real Estate Company QSC (Barwa) is a Qatar-based real estate company engaged in the
acquisition, reclamation, development and reselling of lands to establish agricultural, industrial
and commercial projects. The company is also involved in real estate administration and operation. Barwa and its subsidiaries focus on domestic and international real estate development business, investments, hotel ownership and management, financial services, consulting, advertisement, and brokerage service, among others.
Barwa was created by government-owned Qatari Diar Real Estate Investment Company in 2004 to
focus on building medium-sized residential and tourism developments locally and abroad. The
company underwent an IPO on the Doha Securities Market in 2006. The IPO raised US$330 million
for 55% of the company's equity.
58
MENA Year Book - 2011
Financial performance
For the nine months ended September 30, 2010, Barwa Real Estate Company's total revenues rose
30.2% YoY to QAR2.6 billion, reflecting an increase in higher rental income, sale of properties &
projects, consulting & services income, and other incomes. Net income grew 24.6% YoY to
QAR775.7 million, primarily due to higher revenues and decline in impairment losses, partially
offset by rise in D&A expense and net finance costs.
Comments/Outlook
Barwa has large number of domestic and international projects in the pipeline, cementing strong
future growth. The domestic projects include the Barwa City project being built on a 2.7 million
square meter plot. The project is likely to be developed in two phases; phase one is scheduled for
completion by the end of 2011. The other domestic project is the Barwa Financial District being
built on a 71,000 square meter plot to cater to the growing needs of corporates; the project is
expected to be completed by 2013. On the international front, Barwa’s New Cairo Master Development is estimated to be the company’s largest investment to date. The project has a planned
gross built up area of 8 million square meters with an anticipated completion date of 2023.
Barwa’s first investment in Saudi Arabia, Jeddah Central Market (a modern vegetable market), was
introduced through its international arm in 2007 to spearhead the company’s initiative in the Kingdom. The project is scheduled for completion by 1Q2011. Initiatives from the governmentpromoted Qatar Vision for 2030 are well on track to achieve the national vision. The country also
has plans to continue its healthy government spending and is on target to post a fiscal surplus by
the end of 2012. Qatar’s budget for FY2010-11 allocates QAR117.9 billion for general spending. Of
the total QAR43.5 billion allocated to capital spending, 82% would be spent on infrastructure. This
is a positive driver for real estate and construction companies.
Financials
Exhibit 60: Income Statement (in QAR million)
Total Revenue
2006
2007
2008
2009
9M2010
554
1,109
1,229
3,013
2,581
100%
11%
145%
30%
% Change
Gross Profit
520
999
1,168
2,954
1,666
Margin %
94%
90%
95%
98%
65%
37
148
512
997
875
0
0
(6)
0
55
Other Operating Expenses
64
394
435
1,224
882
Total Operating Expenses
102
547
957
2,273
1,812
Operating Income
453
562
271
740
769
Margin %
82%
51%
22%
25%
30%
0
0
(35)
(39)
2
453
562
306
780
767
0
(32)
4
22
9
SG&A Expense
Interest Exp.(Inc.),Net-Operating, Total
Provision for Income Taxes
Net Income After Taxes
Minority Interest
Net Income
EPS (Basic)
453
530
310
802
776
11.75
12.72
16.16
20.42
10.06
Source: Reuters Knowledge
59
MENA Year Book - 2011
Exhibit 61: Balance Sheet (in QAR million)
2006
2007
2008
2009
9M2010
Cash and Short Term Investments
224
770
539
1,928
12,344
Total Receivables, Net
885
2,795
3,247
5,330
8,882
-
49
84
170
-
15
322
1,010
1,292
1,360
-
69
98
-
-
Prepaid Expenses
Property, Plant and Equipment, Total - Net
Goodwill, Net
Intangibles, Net
Long Term Investments
-
8
8
229
252
696
2,615
2,787
2,876
15,292
Note Receivable - Long Term
1,968
7
4
515
1,844
Other Long Term Assets, Total
1,520
9,062
16,542
22,658
25,012
Total Assets
5,309
15,696
24,317
34,998
64,986
278
2,868
2,558
4,231
5,397
Accounts Payable
Accrued Expenses
Notes Payable/Short Term Debt
Other Current liabilities, Total
Long Term Debt
Deferred Income Tax
Minority Interest
6
255
506
-
-
419
9,142
12,476
21,140
44,369
75
67
352
-
-
1,124
-
-
-
-
-
139
108
42
36
-
250
330
635
660
944
-
3,543
3,717
4,242
Total Liabilities
2,846
12,720
19,874
29,765
54,704
Common Stock
2,000
2,000
2,625
2,625
3,891
463
956
1,772
2,609
6,396
-
-
-
(1)
(5)
Other Long Term Liabilities
Retained Earnings (Accumulated Deficit)
Treasury Stock - Common
Other Equity
-
19
46
-
-
Total Equity
2,463
2,975
4,443
5,233
10,282
Total Liabilities & Shareholders' Equity
5,309
15,696
24,317
34,998
64,986
2008
2009
9M2010
Source: Reuters Knowledge
Exhibit 62: Cash Flow Statement (in QAR million)
2006
2007
Cash from Operating Activities
(1,102)
1,347
1,297
(1,279)
NA
Cash from Investing Activities
(1,104)
(9,783)
(6,356)
(7,371)
NA
Cash from Financing Activities
2,430
8,939
4,653
9,195
NA
0
43
16
55
NA
224
546
(391)
600
NA
0
224
770
379
NA
224
770
379
979
NA
Foreign Exchange Effects
Net Change in Cash
Net Cash - Beginning Balance
Net Cash - Ending Balance
Source: Reuters Knowledge
60
MENA Year Book - 2011
Commercial Bank of Qatar QSC
Key statistics
Shareholding
Sector: Banking
QAR88.00
Price – 16 Feb 2011
Market Cap (mn)
QAR19,961.04
Price 52wk High/Low
QAR94.00/62.00
Ticker: Bloomberg/
Reuters
CBQK QD/COMB.QA
Public
77.74%
Qatar Investment
Authority
9.10%
Qatar National Bank
2.97%
Foreign ownership limit
25.00%
Shares Outstanding
226.83 mn
Exhibit 63: Share Price Chart – 1 year (in QAR)
100
90
80
70
60
50
Feb-10
Apr-10
Jul-10
Sep-10
Nov-10
Feb-11
Source: Zawya
Business Description
The Commercial Bank of Qatar Q.S.C. (CBQ) was established in 1975 as Qatar’s first privatelyowned bank. The bank is primarily engaged in commercial and Islamic banking services. The range
of services includes corporate, retail, Islamic and investment services. CBQ has an extensive network of 32 branches, including eight Islamic banking branches and 138 ATMs across the country.
The bank also acts as a holding company for its subsidiaries engaged in credit card business in
Oman and Egypt. CBQ has entered into strategic alliances with National Bank of Oman (NBO) in
Oman and United Arab Bank (UAB) in the UAE to expand its footprint. NBO is the second largest
bank in Oman with 67 branches in the country, five branches in Egypt and one in Abu Dhabi. UAB
operates 10 branches in the UAE.
Financial performance
CBQ recorded higher net interest income (NII) in 2010, benefiting from the healthy growth in loan
portfolio (5.8% y-o-y increase in 2010) and lower interest expenses (down 16.8% y-o-y to QAR1.2
billion).
61
MENA Year Book - 2011
The bank’s NII (before loan loss provisions) grew 7% y-o-y to QAR1.8 billion during the period.
Moreover, a significant reduction in CBQ’s loan loss provisions, down 63.9% y-o-y to QAR0.2 billion, supported higher NII. Hence, the bank’s NII (excluding loan loss provisions) increased 34.3% yo-y to QAR1.6 billion in 2010. The significant growth in NII helped CBQ offset the decline in noninterest income (NOI), which dropped 18.5% y-o-y to QAR0.8 billion, and higher non-interest expenses, up 16.8% y-o-y to QAR0.9 billion, in 2010. As a result, the bank reported a 7.3% y-o-y increase in its bottom-line to QAR1.6 billion in 2010.
Comments/Outlook
CBQ is witnessing increased loan growth, notably from higher public sector lending. Considering
the bank has low public sector exposure (around 15% of its total loan portfolio), increasing contribution from the public sector is a positive for diversifying its loan book. The bank is focusing on
enhancing its existing domestic corporate and retail customer base, while developing its presence
in the public sector. As a part of its diversification initiatives, CBQ and Qatar Insurance Company
announced the incorporation of Massoun Insurance Services, a joint venture to provide a range of
tailored insurance products, to cater to the bank’s retail and corporate customers. The incorporation would also provide increased cross-selling opportunities. Moreover, CBQ’s strategic partnerships augur well for its bottom-line expansion. Both UAB and NBO contributed to 9.5% of the
bank’s net income in 2010.
CBQ also displayed improved asset quality with non-performing loan (NPL) ratio, on a 90 day basis,
reducing to 3.16% at the end of 2010 from 3.56% at the end of 2009. The bank’s strong capital
position, with a capital adequacy ratio of 18.5% at the end of 2010, is well above the 10% minimum threshold required by the Qatar Central Bank.
Financials
Exhibit 64: Income Statement (in QAR million)
2006
2007
2008
2009
2010
Interest Income, Bank
1,456
2,328
2,873
3,117
2,989
Total Interest Expense
751
1,399
1,581
1,456
1,211
Net Interest Income
704
929
1,292
1,661
1,778
6
48
59
461
167
1,611
Loan Loss Provision
Net Interest Inc. After Loan Loss Prov.
699
881
1,233
1,200
Non-Interest Income, Bank
629
1,014
1,477
936
763
(545)
(637)
(1,215)
(765)
(894)
784
1,257
1,495
1,371
1,480
0
0
0
0
0
784
1,257
1,495
1,371
1,480
79
133
208
153
155
863
1,391
1,702
1,524
1,635
Non-Interest Expense, Bank
Net Income Before Taxes
Provision for Income Taxes
Net Income After Taxes
Equity In Affiliates
Net Income Before Extra. Items
Source: Reuters Knowledge
62
MENA Year Book - 2011
Exhibit 65: Balance Sheet (in QAR million)
2006
2007
2008
2009
2010
Cash & Due from Banks
1,018
2,249
3,015
4,374
8,703
Trading Account Assets
5,493
9,019
14,316
5,644
4,238
0
0
34,184
32,652
34,546
Total Gross Loans
Loan Loss Allowances
Net Loans
Property/Plant/Equipment, Total - Gross
Accumulated Depreciation, Total
Property/Plant/Equipment, Total - Net
0
0
(287)
(722)
(980)
4,321
4,665
38,672
41,677
43,590
754
0
1,451
1,437
1,573
(196)
0
(315)
(407)
(504)
558
721
1,136
1,030
1,069
1,285
3,330
3,641
3,760
3,840
Other Assets
17,682
25,413
704
833
1,081
Total Assets
30,358
45,397
61,485
57,317
62,520
Interest Bearing Deposits
Long Term Investments
16,701
24,657
29,338
24,021
29,911
Total Short Term Borrowings
2,695
4,908
10,923
7,391
3,553
Total Debt
2,695
4,908
10,923
7,391
3,553
Other Liabilities
5,331
9,605
11,245
13,894
16,556
Total Liabilities
24,727
39,169
51,506
45,307
50,020
Common Stock
1,402
1,402
2,062
2,165
2,268
Retained Earnings (Accumulated Deficit)
4,230
4,826
7,916
9,845
10,232
Total Equity
Total Liabilities & Shareholders' Equity
5,631
6,228
9,978
12,010
12,500
30,358
45,397
61,485
57,317
62,520
Source: Reuters Knowledge
Exhibit 66: Cash Flow Statement (in QAR million)
2006
2007
2008
2009
2010
Cash from Operating Activities
(1,473)
1,232
(80)
(5,361)
6,753
Cash from Investing Activities
(1,608)
(2,176)
(1,489)
(1,792)
(279)
Cash from Financing Activities
2,670
2,500
1,151
3,989
(210)
Net Change in Cash
(410)
1,556
(418)
(3,163)
6,264
Net Cash - Beginning Balance
3,542
3,131
4,687
4,269
1,106
Net Cash - Ending Balance
3,131
4,687
4,269
1,106
7,370
Source: Reuters Knowledge
63
MENA Year Book - 2011
Commercial International Bank Egypt SAE
Key statistics
Shareholding
Sector: Banking
Price – 27 Jan 2011
EGP36.49
Market Cap (mn)
Public
90.67%
Actis
9.33%
EGP21,534.37
Price 52wk High/Low
EGP47.70/29.76
Ticker: Bloomberg/
Reuters
COMI EY/COMI.CA
Foreign ownership limit
100.00%
Shares Outstanding
590.14 mn
Exhibit 67: Share Price Chart – 1 year (in EGP)
50
45
40
35
30
25
Feb-10
Apr-10
Jun-10
Sep-10
Nov-10
Jan-11
Source: Zawya
Business Description
Commercial International Bank (CIB) was founded by National Bank of Egypt (NBE) and Chase
Manhattan Bank (CMB) in 1975 under the Open Door Policy. CIB has since become Egypt’s leading
private sector bank, providing diversified services to its customers through 505 ATMs, 154
branches and 47 units. Since its successful IPO in September 1993, the bank has been one of the
Egyptian stock market’s blue chips.
CIB provides commercial banking services (including deposits, loans and credit cards), asset management services (including fund, wealth and portfolio management), investment banking services
(including corporate finance and investment advisory on M&As, IPOs and underwriting), direct
investments, and brokerage services.
The bank has an employee base of 4,500 and is the only Egyptian financial institution offering both
commercial and investment banking services. CIB is the market leader in terms of market cap,
profitability and net worth among all Egyptian private sector banks. The bank controls a 7.57%
market share of the total deposits and a 6.52% market share of the total loans (as of September
2010).
64
MENA Year Book - 2011
Financial performance
For the nine months ended September 30, 2010, CIB's total banking income increased 11.5% to
EGP2.3 billion driven by higher reported net interest income, and net fees & commissions income.
The net interest income (NII) rose 8.9% to EGP1.6 billion owing to a 71.7% higher NII from treasury
bills and bonds as well as a 0.9% up in interest received from loans to clients, offsetting a 19.9%
decrease in interest received from loans to other banks. The net fees and commissions income
went up 18.7% y-o-y to EGP630.6 million primarily due to higher fees and commissions related to
credit and an increase in other fees. Operating expenses witnessed a 13% y-o-y growth as an additional goodwill amortization worth EGP30.1 million was recorded that did not exist last year. These
resulted in a 5% rise in the operating income to EGP1.7 billion. Net income rose 11.4% to EGP1.4
billion owing to raised fees and commission income, an increase in profit from financial investments and a fall in losses incurred by impairment from loans.
Comments/Outlook
The bank’s long-term vision is to become the best financial institution in the Middle East and Africa
by 2020. Increased FDI in Egypt, constitutional changes aimed at stimulating free market expansion, and introduction of banking reforms in the country are positive drivers for CIB. The bank has
focused on forming alliances and partnerships to help extend its presence in the Gulf region and
has also implemented an expansion plan. A large local consumption base, favorable demographics
and strong financial performance expected from private corporations in 2010 are certain other
factors that are expected to boost corporate lending. CIB also intends to enhance its consumer
banking platform by strengthening the wealth and business banking segments, and target to
achieve higher fee revenues from investment and insurance products.
Financials
Exhibit 68: Income Statement (in EGP million)
Interest & Fees on Loans
Other Interest Income
2006
2007
2008
2009
9M2010
1,749
2,998
3,765
4,033
3,310
568
0
0
0
0
(1,375)
(1,798)
(1,967)
(2,003)
(1,666)
Net Interest Income
942
1,200
1,799
2,030
1,644
Loan Loss Provision
194
251
411
97
29
Net Interest Inc. After Loan Loss Prov.
748
949
1,388
1,933
1,615
Fees & Commissions from Operations
441
640
748
765
631
Other Unusual Income
280
227
455
486
437
Other Revenue
165
354
282
103
99
Interest on Other Borrowings
Non-Interest Income, Bank
886
1,220
1,484
1,354
1,167
(699)
(698)
(1,256)
(1,238)
(1,057)
935
1,472
1,616
2,049
1,725
83
183
251
339
308
Net Income After Taxes
853
1,289
1,365
1,710
1,417
Minority Interest
Net Income
(1)
852
(3)
1,286
5
1,371
(2)
1,708
(1)
1,416
Other Expense
Net Income Before Taxes
Provision for Income Taxes
Source: Reuters Knowledge
65
MENA Year Book - 2011
Exhibit 69: Balance Sheet (in EGP million)
2006
2007
2008
2009
9M2010
Cash & Due from Banks
9,475
18,836
11,045
12,125
12,224
Fed Funds Sold / Bought Under Resale
4,063
2,952
12,457
13,199
8,417
901
684
642
491
1,118
Trading Account Assets
Total Investment Securities
Net Loans
Property, Plant and Equipment, Total - Net
Net Intangibles
Long-Term Investments
Other Long-Term Assets, Total
4,008
2,873
4,161
8,245
12,839
17,464
20,479
26,330
27,304
33,904
507
620
748
750
726
-
-
641
573
523
108
91
93
93
104
41
52
19
37
39
Other Assets
962
1,179
1,124
1,106
1,139
Total Assets
37,553
47,906
57,462
64,125
71,240
Accounts Payable
801
761
1,298
1,140
490
31,567
39,476
48,790
54,649
60,498
1,360
2,541
430
671
914
Long-Term Debt
99
161
109
93
135
Minority Interest
6
5
46
46
47
Total Deposits
Other bearing liabilities
Other Liabilities
342
461
1,010
531
1,191
Total Liabilities
34,176
43,406
51,683
57,129
63,275
Common Stock
1,950
1,950
2,925
2,925
5,901
Retained Earnings (Accumulated Deficit)
1,427
2,551
2,853
4,071
2,064
Total Equity
Total Liabilities & Shareholders' Equity
3,377
4,501
5,778
6,996
7,965
37,553
47,906
57,462
64,125
71,240
Source: Reuters Knowledge
Exhibit 70: Cash Flow Statement (in EGP million)
2006
2007
2008
2009
9M2010
994
1,663
5,580
6,683
1,495
Cash from Investing Activities
86
1,111
(1,271)
(4,737)
(4,402)
Cash from Financing Activities
(20)
(250)
(397)
(495)
(594)
Net Change in Cash
1,061
2,524
3,912
1,452
(3,501)
Net Cash - Beginning Balance
3,295
4,356
6,879
8,779
10,231
Net Cash - Ending Balance
4,356
6,879
10,791
10,231
6,729
Cash from Operating Activities
Source: Reuters Knowledge
66
MENA Year Book - 2011
DP World
Key statistics
Shareholding
Sector: Transportation
Price – 16 Feb 2011
USD0.59
Market Cap (mn)
USD9,860.40
Price 52wk High/Low
USD0.68/0.37
Ticker: Bloomberg/
Reuters
DPW DU/DPW.DI
Dubai World
80.45%
Public
19.55%
Foreign ownership limit
40.00%
Shares Outstanding
16,600.00 mn
Exhibit 71: Share Price Chart – 1 year (in USD)
0.7
0.6
0.5
0.4
0.3
Feb-10
Apr-10
Jul-10
Sep-10
Dec-10
Feb-11
Source: Zawya
Business Description
DP World, formerly Galaxy Investments Limited, owns and operates marine terminals and seaports. The company also provides rental services of port equipment and supplies, maritime support, port security, management of marine assets, and warehousing.
DP World is one of the largest marine terminal operators in the world with 50 terminals and 10
new developments as well as major expansions across 31 countries. In 2010, the company handled
49.6 million twenty foot equivalent container units (TEU) across its portfolio.
DP World is part of the government-owned Dubai World through Port & Free Zone World. The
company was formed in September 2005 with the integration of the terminal operations of Dubai
Ports Authority and Dubai Ports International. Acquisition of P&O for US$7.2 billion in March 2006
helped DP World establish its place amongst the top four terminal operators globally.
Financial performance
DP World reported revenues of US$1.52 billion in the first half of 2010, up 10.1% y-o-y. Higher
volumes and a strong price environment helped the company achieve this revenue growth. Container revenues bounced back to its 2008 levels of US$90 per TEU in the first half of 2010.
67
MENA Year Book - 2011
However, revenue growth did not turn into higher profitability for the company. DP World’s gross
margins fell to 29.2% in the first half of 2010 from 33.1% in the same period of 2009. The decline
could be due to initial expenses relating to the new terminals in Qingdao (China) and Callao (Peru)
as well as lower utilization rates. Despite lower profit margins, the company earned a higher net
income of US$176.6 million in the first half of 2010 compared to US$175.3 million in the second
half of 2009; this was owing to a higher share in profit from joint ventures and associates. Lower
tax provision also added to bottom line growth. Though the full year results are not yet out, DP
World has announced that the company handled 49.6 million TEU across its portfolio in 2010, a
14% increase compared to 2009.
Comments/Outlook
The company is focusing on the emerging markets of South Asia, Africa and South America. DP
World recently offloaded a stake of nearly 75% in DP World Australia to Citi Infrastructure Investors netting AU$1.5 billion. According to various press releases, total proceeds from this will go
towards reducing the company's debt. DP World had a total debt of US$8.04 billion at the end of
the first half of 2010. The company is looking at improving its balance sheet flexibility by bringing
down the debt.
DP World is targeting to raise capacity to around 92 million TEU by 2020. The company would be
launching new terminals in Karachi (2011), Turkey (2012), Abu Dhabi (2013), London (2013), Senegal (2013) and Kulpi (2013) over the next few years.
Financials
Exhibit 72: Income Statement (in USD million)
2006
2007
2008
2009
1H2010
Total Revenue
3,487
2,731
3,283
2,929
1,524
Cost of Sales
2,522
1,883
2,143
2,064
1,079
Gross Profit
Margin %
SG&A expenses
Depreciation/Amortization
Operating Income
Interest Expense, Net Non-Operating
Interest/Invest Income - Non-Operating
Interest Inc.(Exp.),Net-Non-Op., Total
Other, Net
Net Income Before Taxes
Provision for Income Taxes
Net Income After Taxes
Net Margin %
Minority Interest
964
848
1,140
865
445
27.7%
31.1%
34.7%
29.5%
29.2%
525
295
436
305
159
0
0
0
0
0
439
553
704
560
286
(403)
(546)
(349)
(354)
(191)
131
567
87
185
106
(272)
21
(262)
(169)
(85)
43
45
35
33
30
210
619
477
424
231
12
81
47
54
12
198
539
431
370
219
5.7%
19.7%
13.1%
12.6%
14.4%
(25)
(45)
(48)
(37)
(43)
Discontinued Operations
19
611
0
0
0
Net Income After Taxes
192
1,105
382
333
177
Source: Reuters Knowledge
68
MENA Year Book - 2011
Exhibit 73: Balance Sheet (in USD million)
2006
2007
2008
2009
1H2010
Cash and Short Term Investments
2,241
3,059
1,204
2,910
2,679
Total Receivables, Net
1,248
704
741
807
735
64
54
57
60
57
Total Inventory
Other Current Assets, Total
1,420
20
10
28
21
Total Current Assets
4,973
3,837
2,013
3,806
3,492
Property/Plant/Equipment, Total - Gross
4,272
4,379
5,199
6,032
NA
Accumulated Depreciation, Total
(590)
(939)
(946)
(1,172)
NA
Property/Plant/Equipment, Total - Net
3,682
3,440
4,253
4,859
5,097
Goodwill - Net
3,104
2,510
2,154
2,425
2,275
Intangibles, Net
3,441
3,983
3,841
4,174
3,993
Long Term Investments
2,954
3,364
3,160
3,519
3,415
Other Long Term Assets, Total
Total Assets
Accounts Payable
Notes Payable/Short Term Debt
Current Port. of LT Debt/Capital Leases
Income Taxes Payable
88
56
78
178
230
18,242
17,190
15,499
18,961
18,502
1,092
919
1,048
818
901
4
183
50
12
3
192
111
172
483
669
0
468
122
127
0
530
85
42
45
135
Total Current Liabilities
1,819
1,767
1,434
1,484
1,708
Long Term Debt
5,526
5,608
5,197
7,475
7,372
Deferred Income Tax
1,278
991
1,168
1,305
1,253
702
657
740
807
790
Other Current liabilities, Total
Minority Interest
Other Liabilities, Total
488
452
527
659
632
9,813
9,475
9,066
11,730
11,754
Common Stock, Total
0
1,660
1,660
1,660
1,660
Additional Paid-In Capital
0
2,473
2,473
2,473
2,473
228
3,040
3,102
3,233
3,251
8,201
543
(801)
(134)
(636)
Total Liabilities
Retained Earnings (Accumulated Deficit)
Other Equity, Total
Total Equity
Total Liabilities & Shareholders' Equity
8,429
7,716
6,433
7,231
6,748
18,242
17,190
15,499
18,961
18,502
2009
1H2010
Source: Reuters Knowledge
Exhibit 74: Cash Flow Statement (in USD million)
2006
Cash from Operating Activities
2007
2008
298
955
1,069
572
487
Cash from Investing Activities
(7,212)
4,354
(2,007)
(915)
(490)
Cash from Financing Activities
8,368
(2,433)
(686)
1,963
(190)
36
0
(97)
124
0
1,490
2,876
(1,722)
1,744
(193)
250
0
2,876
1,154
2,869
1,741
2,876
1,154
2,899
2,676
Foreign Exchange Effects
Net Change in Cash
Net Cash - Beginning Balance
Net Cash - Ending Balance
Source: Reuters Knowledge
69
MENA Year Book - 2011
Emaar Properties
Key statistics
Shareholding
Sector: Real Estate
AED3.17
Price – 16 Feb 2011
Market Cap (mn)
AED19,309.23
Price 52wk High/Low
AED4.14/2.85
Ticker: Bloomberg/
Reuters
EMAAR UH/EMAR.DU
Public
68.78%
Investment Corporation
of Dubai
31.22%
Foreign ownership limit
49.00%
Shares Outstanding
6,091.24 mn
Exhibit 75: Share Price Chart – 1 year (in AED)
4.5
4.0
3.5
3.0
2.5
Feb-10
Apr-10
Jul-10
Sep-10
Nov-10
Feb-11
Source: Zawya
Business Description
Established in 1997, Emaar Properties is a UAE-based company engaged in property investment
and development, property management services, education, healthcare, retail and hospitality
sectors, as well as investing in financial service providers.
Emaar Properties is the largest publicly-listed property developer in the MENA region. The company operates domestically and internationally in 17 countries, including Saudi Arabia, Syria, Jordan, Lebanon, Egypt, Morocco, India, Pakistan, Turkey, China, the US, Canada and the UK. Its domestic projects include Burj Dubai, Dubai Marina, Arabian Ranches, Emirates Hills, The Meadows,
The Springs, The Greens, The Lakes, The Views, Emaar Tower and Mushrif Heights.
Emaar Properties also holds equity in Dubai Bank, focused on retail and commercial banking; Amlak Finance, an Islamic home financing company; and Emaar Finance and Industries, which focuses
on investments in high technology and light manufacturing industries. Government of Dubai owns
31.22% of Emaar Properties through Investment Corporation of Dubai.
70
MENA Year Book - 2011
Financial performance
Emaar Properties reported revenues totaling AED8,320.4 million for 9M2010 compared to
AED5,429.5 million during the same period last year. The 53.2% YoY growth in the revenues came
largely from the hospitality and malls businesses. Emaar Properties’ gross profit margins contracted to 40.3% in 9M2010 compared to 49.3% in 9M2009 due to poor market conditions and
lower margins in the Dubai operations (33% in 9M2010 compared to 45% in 2009). As a result,
Emaar Properties ended 9M2010 with a net profit of AED2,174.8 million. The company incurred a
loss of AED392.8 million during the same period last year. Emaar Properties’ EPS stood at AED0.35
as against a loss per share of AED 0.06.
Comments/Outlook
Emaar has been taking efforts to extend its debt maturity profile. In January 2011, the company
raised US$500 million by selling Islamic bonds, or sukuk, its first fixed-income offering. The 5.5year sukuks would provide a yield of 8.50% to investors. In September 2010, the company raised
US$500 million with coupon of 7.5% to refinance short-term liabilities.
Emaar Properties’ long-debt debt totaled AED5,156.9 million at the end of September 30, 2010.
Financials
Exhibit 76: Income Statement (in AED million)
Total Revenue
2006
2007
2008
2009
9M2010
14,006
17,869
10,717
8,413
8,320
Cost of Sales
7,039
10,815
5,487
4,314
4,966
Gross Profit
6,966
7,054
5,230
4,099
3,354
50%
39%
49%
49%
40%
1,400
1,938
1,610
1,276
1,039
0
181
295
636
356
Margin %
SG&A expenses total
Depreciation/Amortization
Other Operating Expenses, Total
(176)
(287)
(169)
(153)
(102)
Operating Income
5,742
5,223
3,494
2,340
2,061
Margin %
41.0%
29.2%
32.6%
27.8%
24.8%
Interest Expense, Net Non-Operating
(93)
(154)
(75)
(217)
(282)
Interest Income - Non-Operating
367
396
422
356
199
Investment Income - Non-Operating
133
402
109
(534)
(235)
Other, Net
Net Income Before Taxes
Provision for Income Taxes
253
684
240
83
469
6,403
6,551
4,189
2,028
2,211
47
14
(3)
(24)
(1)
Net Income After Taxes
6,356
6,536
4,191
2,051
2,212
Net Margin %
45.4%
36.6%
39.1%
24.4%
26.6%
15
39
42
38
15
Minority Interest
Discontinued Operations
Net Income
EPS
0
0
(4,068)
(1,762)
(53)
6,371
6,575
166
327
2,175
1.06
1.08
0.03
0.05
0.35
Source: Reuters Knowledge
71
MENA Year Book - 2011
Exhibit 77: Balance Sheet (in AED million)
2006
2007
2008
2009
9M2010
Cash and Short Term Investments
2,329
4,727
5,393
2,267
3,568
Total Receivables, Net
2,690
3,969
4,569
4,193
4,076
Total Current Assets
5,019
8,696
9,962
6,459
7,644
Property/Plant/Equipment, Total - Gross
4,446
7,770
5,893
7,606
0
Accumulated Depreciation, Total
(261)
(336)
(479)
(784)
0
Property/Plant/Equipment, Total - Net
4,185
7,433
5,414
6,822
7,318
Goodwill, Net
2,962
2,962
439
439
46
27,627
41,344
49,229
48,419
45,659
428
538
1,636
2,005
2,266
Long Term Investments
Note Receivable - Long Term
Other Assets, Total
1,469
0
0
0
0
41,690
60,973
66,680
64,145
62,933
Accounts Payable
6,265
5,919
9,680
9,545
1,131
Payable/Accrued
0
0
0
0
4,604
1,100
1,563
4,564
4,500
4,776
Total Assets
Notes Payable/Short Term Debt
Other Current liabilities, Total
876
15,148
19,188
17,048
16,218
Total Current Liabilities
8,241
22,631
33,432
31,094
26,728
Long Term Debt
2,893
6,140
4,610
4,125
5,157
566
652
494
202
187
Minority Interest
Other Liabilities, Total
Total Liabilities
Common Stock, Total
Retained Earnings (Accumulated Deficit)
12
18
37
47
57
11,711
29,441
38,574
35,467
32,129
6,076
6,091
6,091
6,091
6,091
23,898
24,971
22,418
22,785
24,774
Treasury Stock - Common
0
0
(1)
(1)
0
Other Equity, Total
5
470
(401)
(198)
(61)
Total Equity
29,979
31,532
28,107
28,677
30,804
Total Liabilities & Shareholders' Equity
41,690
60,973
66,680
64,145
62,933
2008
2009
9M2010
Source: Reuters Knowledge
Exhibit 78: Cash Flow Statement (in AED million)
2006
Cash from Operating Activities
2007
2,882
5,973
6,132
(1,632)
315
Cash from Investing Activities
(11,361)
(7,058)
(2,681)
(2,790)
(1,022)
Cash from Financing Activities
684
1,960
1,160
1,210
1,037
8
7
(30)
11
(7)
Foreign Exchange Effects
Net Change in Cash
(7,787)
883
4,581
(3,202)
323
Net Cash - Beginning Balance
9,036
1,249
2,132
5,175
1,860
Net Cash - Ending Balance
1,249
2,132
6,712
1,973
2,183
Source: Reuters Knowledge
72
MENA Year Book - 2011
Etihad Etisalat Co
Key statistics
Shareholding
Sector: Telecommunications
Public
SAR52.75
Price – 16 Feb 2011
SAR36,925.00
Market Cap (mn)
61.34%
Emirates
Telecommunications Corp
General Organization for
Social Insurance
Price 52wk High/Low
SAR57.00/44.20
Foreign ownership limit
Ticker: Bloomberg/
Reuters
EEC AB/7020.SE
Shares Outstanding
27.46%
11.20%
49.00%
700.00 mn
Exhibit 79: Share Price Chart – 1 year (in SAR)
60
55
50
45
40
Feb-10
Apr-10
Jul-10
Sep-10
Dec-10
Feb-11
Source: Zawya
Business Description
The UAE-based telecom conglomerate Etihad Etisalat (Mobily), established in 2004 by a Etisalatled consortium, is the second largest mobile operator in the Kingdom of Saudi Arabia (KSA). According to the Communications and Information Technology Commission, Etihad Etisalat holds
more than 40% of the market share of mobile subscriptions in the KSA. The company bagged the
second mobile license in the KSA for SAR12.21 billion in July 2004 and launched its commercial
services in May 2005. Etihad Etisalat introduced 3G services in June 2006. The company is considered one of the biggest 3G mobile operators in the Middle East. Etihad Etisalat mainly offers GSM
mobile and internet services. The company’s presence in the fixed-line segment is very limited.
Etihad Etisalat and Saudi Telecom Company are the only operators who possess the rights to offer
mobile as well as fixed services in the KSA.
Financial performance
The company reported revenues of SAR16.01 billion in 2010, up 22.6% y-o-y. The revenue growth
was largely a result of a rising subscriber base and increased usage of data services.
73
MENA Year Book - 2011
Etihad Etisalat strengthened its data services offering through the acquisition of Bayanat Al Oula in
March 2008 (a licensed data service provider) and Zajil (a leading internet service provider) in November 2008. Despite a 300 basis point reduction in the gross profit margins, the company ended
2010 with an increase in operating profit margins. Etihad Etisalat managed to improve its operating profit margins to 27.2% in 2010 from 24.6% in 2009 due to tighter cost controls, particularly in
selling and marketing expenses (as a % of sales). Operating profit margins generated in the fourth
quarter of 2010 were the highest ever reported by the company in its five-year history. As a result,
Etihad Etisalat ended 2010 with a net income of SAR4.21 billion compared to SAR3.01 billion in
2009, representing a 39.7% growth.
Comments/Outlook
Having completed five successful years in the Saudi market, Etihad Etisalat is now pursuing what it
calls the 2011–15 strategic plan ‘GED’ to provide integrated telecom services built around fixed
and mobile broadband technologies. The three key elements of the plan are: Growth, Efficiency
and Differentiation (GED). The “Growth” dimension of the strategy refers to growing revenues
from the broadband and wholesale business, while “Efficiency” means to improve efficiency
through infrastructure sharing, better spectrum utilization, and technology optimization. The last
element “Differentiation” is to delight the customers by excelling in customer service and having
the best work environment for employees. Furthermore, Etihad Etisalat has joined seven other
operators in the region to build the RCN (Regional Cable Network), a 4,000 kilometer diversified
cable system. Once completed, the fiber optic cable line would provide robust bandwidth connectivity to the operators.
Financials
Exhibit 80: Income Statement (in SAR million)
Total Revenue
% Change
Cost of Sales
2006
2007
2008
2009
2010
6,183
8,440
10,795
13,058
16,013
268.0%
36.5%
27.9%
21.0%
22.6%
2,661
3,792
4,768
5,512
7,230
Gross Profit
3,522
4,648
6,026
7,547
8,783
Margin %
57.0%
55.1%
55.8%
57.8%
54.9%
SG&A expenses total
1,397
1,410
2,232
2,710
2,619
845
1,031
1,299
1,629
1,810
Depreciation/Amortization
Other Operating expenses
124
292
0
0
0
Operating Income
1,156
1,916
2,495
3,208
4,355
Margin %
18.7%
22.7%
23.1%
24.6%
27.2%
(455)
(512)
(396)
(163)
(76)
700
1,404
2,099
3,045
4,279
0
24
7
31
67
Other Non-Operating Income (Expense)
Net Income Before Taxes
Provision for Income Taxes
Net Income After Taxes
Net Margin %
EPS
700
1,380
2,092
3,014
4,211
11.3%
16.3%
19.4%
23.1%
26.3%
1.11
2.18
4.00
4.31
6.02
Source: Reuters Knowledge
74
MENA Year Book - 2011
Exhibit 81: Balance Sheet (in SAR million)
2006
2007
2008
2009
2010
Cash and Short Term Investments
548
703
2,314
1,533
2,111
Total Receivables, Net
739
1,531
3,137
5,550
5,759
38
69
108
132
297
Total Inventory
Prepaid Expenses
717
810
1,063
1,256
1,249
Total Current Assets
2,041
3,113
6,621
8,473
9,415
Property/Plant/Equipment, Total - Gross
4,253
6,401
9,832
13,186
16,539
Accumulated Depreciation, Total
(405)
(922)
(1,715)
(2,817)
(4,082)
Property/Plant/Equipment, Total – Net
3,848
5,479
8,117
10,370
12,457
0
0
1,530
1,530
1,530
11,800
11,287
10,923
10,450
10,028
0
2
0
0
0
Goodwill - Net
Intangibles, Net
Long Term Investments
Total Assets
17,689
19,881
27,192
30,822
33,430
Accounts Payable
1,696
3,188
4,443
6,378
6,479
Accrued Expenses
1,687
624
2,567
3,552
3,335
Notes Payable/Short Term Debt
7,840
0
1,862
377
599
0
1,011
1,286
1,777
1,843
Current Port. of LT Debt/Capital Leases
Other Current liabilities, Total
Total Current Liabilities
Long Term Debt
Other Liabilities, Total
Total Liabilities
Common Stock, Total
320
1,207
590
0
0
11,543
6,029
10,749
12,084
12,256
1,600
7,912
6,642
6,448
5,529
13
26
46
47
66
13,156
13,968
17,437
18,579
17,851
5,000
5,000
7,000
7,000
7,000
Retained Earnings (Accumulated Deficit)
(467)
913
2,754
5,243
8,580
Total Equity
4,533
5,913
9,754
12,243
15,580
17,689
19,881
27,192
30,822
33,430
Total Liabilities & Shareholders' Equity
Source: Reuters Knowledge
Exhibit 82: Cash Flow Statement (in SAR million)
2006
2007
2008
2009
2010
Cash from Operating Activities
1,928
2,153
3,547
4,246
5,470
Cash from Investing Activities
(1,819)
(1,878)
(5,583)
(2,889)
(3,227)
Cash from Financing Activities
254
(119)
2,586
(1,687)
(1,516)
0
0
0
0
0
Net Change in Cash
362
156
549
(331)
728
Net Cash - Beginning Balance
185
548
715
1,264
933
Net Cash - Ending Balance
548
703
1,264
933
1,661
Foreign Exchange Effects
Source: Reuters Knowledge
75
MENA Year Book - 2011
Emirates Telecommunications Corporation
Key statistics
Shareholding
Sector: Telecommunications
AED10.90
Price – 16 Feb 2011
Market Cap (mn)
Emirates Investment
Authority
Public
60.03%
39.97%
AED86,176.93
Price 52wk High/Low
AED11.85/10.00
Ticker: Bloomberg/
Reuters
ETISALAT UH/ETEL.AD
Foreign ownership limit
0.00%
Shares Outstanding
7,906.14 mn
Exhibit 83: Share Price Chart – 1 year (in AED)
12
11
10
9
Feb-10
Apr-10
Jul-10
Sep-10
Dec-10
Feb-11
Source: Zawya
Business Description
UAE-based Emirates Telecommunications Corporation (Etisalat) provides fixed-line, mobile, internet, data and other telecommunications services in the UAE and other countries. The company’s
telecom operations are spread across 18 countries in Asia, the Middle East and Africa. Etisalat was
the only mobile and fixed-line operator in the UAE until Emirates Integrated Telecommunications
Company (Du) won a license in 2005 to become second such operator in the country. Etisalat’s
business divisions include eCompany, Ebtikar, Emirates Data Clearing House, Emirates Internet
Exchange, Etisalat Academy, Etisalat University College, The Contact Center, UAE Lab and UAE
Network Information Center. Etisalat’s core products and services feature voice communication,
wireless communication and data communication provided jointly with its subsidiaries, e-vision
and e-marine. The company’s subsidiaries also include Thuraya Satellite Telecommunications Company, Zanzibar Telecom Limited and Etihad Etisalat Company (Mobily).
Financial performance
Etisalat’s revenues fell 1.6% to AED23.3 billion in 9M2010 compared to the same period last year.
Intensifying competition in the domestic market, a major revenue contributor, is hurting growth.
76
MENA Year Book - 2011
The UAE contributes around 86% to Etisalat’s sales. While revenues dropped, operating expenses
increased resulting in reduced margins. Etisalat’s operating margin dropped to 20.4% in 9M2010
from 25.9% in 9M2009. As a result, operating income fell 22.6% YoY to AED4.7 billion in 9M2010.
As reduced operating performance trickled down to Etisalat’s bottom-line, the company reported
a net income of AED5.6 billion in 9M2010, a drop of 18.1% over the same period last year.
Comments/Outlook
Etisalat has been focusing on international expansion ever since it lost its monopoly in the domestic market to Du in 2005. The company, which derives more than 80% of its revenues from the
UAE, is facing intense competition in its home market as reflected in its weak recent quarter results. This signifies the importance of increasing the share of revenues coming from outside the
UAE. Considering the increased international presence, Etisalat has announced several expansion
initiatives. Out of these, the company’s bid to buy a 46% stake in Kuwait’s biggest phone company
Mobile Telecommunications Co. (Zain) for around US$10.5 billion, is of vital importance. If concluded, an investment in Zain would help Etisalat gain market share in high-growth markets in the
Middle East (including countries such as Kuwait and Iraq), where Zain has a strong foothold.
Etisalat is also looking for expansion in India, the world’s second-largest wireless market, and is in
talks with the country’s Reliance Communications Ltd. The company is also considering investing
in Idea Cellular Ltd., which provides mobile phone services in India. We believe, given Etisalat’s
rising focus on international acquisitions, the company is well placed to benefit from the growth in
these markets.
Financials
Exhibit 84: Income Statement (in AED million)
2006
2007
2008
2009
9M2010
Total Revenue
16,290
21,340
29,360
30,831
23,325
Cost of Revenue, Total
10,694
14,730
13,024
12,258
7,554
Gross Profit
5,596
6,610
16,336
18,573
15,772
Margin %
34.4%
31.0%
55.6%
60.2%
67.6%
0
0
8,665
8,836
8,866
Selling/General/Admin. Expenses, Total
Depreciation/Amortization
0
0
1,592
1,604
2,156
10,694
14,730
23,280
22,698
18,575
Operating Income
5,596
6,610
6,079
8,133
4,750
Interest Inc.(Exp.)
(262)
(503)
2,108
694
409
Total Operating Expense
Other, Net
Net Income Before Taxes
Provision for Income Taxes
476
736
0
0
(133)
5,810
6,843
8,187
8,827
5,026
0
122
187
244
27
Net Income After Taxes
5,810
6,720
8,000
8,583
4,999
Margin %
35.7%
31.5%
27.2%
27.8%
21.4%
50
576
511
254
103
Minority Interest
Equity In Affiliates
Net Income Before Extra. Items
EPS
0
0
0
0
504
5,860
7,297
8,511
8,836
5,606
0.7
0.9
1.1
1.1
0.7
Source: Reuters Knowledge
77
MENA Year Book - 2011
Exhibit 85: Balance Sheet (in AED million)
Cash and Short Term Investments
Total Receivables, Net
Total Inventory
Other Current Assets, Total
2006
2007
2008
2009
9M2010
10,304
9,433
11,295
11,309
10,650
3,184
3,293
5,981
8,006
8,264
66
175
183
272
279
410
0
0
0
0
13,964
12,901
17,459
19,587
19,193
8,496
11,876
13,101
17,585
19,893
0
0
2,915
3,128
3,128
Intangibles, Net
11,230
13,886
13,289
13,650
12,732
Long Term Investments
12,219
13,773
16,052
17,291
18,966
Deferred Charges
0
12
101
136
213
Other Long Term Assets
0
0
0
0
16
Total Current Assets
Property/Plant/Equipment, Total - Net
Goodwill, Net
Other Long Term Assets, Total
Total Assets
Accounts Payable
Payable/Accrued
Notes Payable/Short Term Debt
Other Current liabilities, Total
0
12
101
136
229
45,908
52,448
62,918
71,379
74,142
9,501
14,530
18,685
19,389
0
0
0
0
0
21,324
1,537
343
722
1,079
4,025
2,567
2,793
2,009
3,020
3,118
13,605
17,665
21,416
23,488
28,467
8,518
3,484
3,367
4,501
5,375
0
147
326
538
567
Minority Interest
2,208
1,838
4,188
3,998
4,035
Other Liabilities, Total
3,928
5,599
2,911
3,541
2,868
Total Liabilities
26,722
28,391
31,486
34,987
37,287
Common Stock
4,538
4,991
5,990
7,187
7,906
Retained Earnings (Accumulated Deficit)
14,649
19,066
25,442
29,204
28,948
Total Equity
19,187
24,057
31,432
36,392
36,854
Total Liabilities & Shareholders' Equity
45,908
52,448
62,918
71,379
74,142
2009
9M2010
Total Current Liabilities
Total Debt
Deferred Income Tax
Source: Reuters Knowledge
Exhibit 86: Cash Flow Statement (in AED million)
2006
Cash from Operating Activities
2007
2008
8,509
10,874
10,596
10,125
7,567
Cash from Investing Activities
(16,757)
(6,013)
(2,902)
(6,771)
(4,322)
Cash from Financing Activities
8,651
(5,924)
(5,642)
(3,407)
(3,800)
646
(871)
1,862
14
(659)
9,659
10,304
9,433
11,295
11,309
10,304
9,433
11,295
11,309
10,650
Net Change in Cash
Net Cash - Beginning Balance
Net Cash - Ending Balance
Source: Reuters Knowledge
78
MENA Year Book - 2011
First Gulf Bank
Key statistics
Shareholding
Sector: Banking
AED17.95
Price – 16 Feb 2011
Market Cap (mn)
AED24,681.25
Abu Dhabi ruling family
members
Public
61.30%
26.23%
Direct Access Investments
6.87%
Price 52wk High/Low
AED19.45/13.50
Foreign ownership limit
25.00%
Ticker: Bloomberg/
Reuters
FGB UH/FGB.SE
Shares Outstanding
1,375.00 mn
Exhibit 87: Share Price Chart – 1 year (in AED)
20
18
15
13
10
Feb-10
Apr-10
Jul-10
Sep-10
Nov-10
Feb-11
Source: Zawya
Business Description
UAE-based First Gulf Bank PJSC provides commercial, investment and retail banking services. The
bank, established in 1979 and headquartered in Abu Dhabi, offers its services through four primary
business segments: Corporate Banking, Retail Banking, Treasury & Investments, and Real Estate
Activities. The Corporate Banking segment handles loans, credit facilities, and deposits and current
accounts for corporate and institutional customers. The Retail Banking segment handles individual
customers' deposits, consumer loans, overdrafts, credit cards and funds transfer facilities. The
Treasury & Investments division offers money market, trading, treasury services and funds management. Real Estate Activities include acquisition, leasing, brokerage, management and resale of
properties. First Gulf Bank operates through a network of branches across the UAE, a subsidiary in
Libya, a branch in Singapore and representative offices in the UK, Qatar and India. The bank had
969 employees and 63 ATMs as of March 2010.
Financial performance
For the nine months ended 30 September 2010, First Gulf Bank's net interest income increased
11.9% YoY to AED3.2 billion.
79
MENA Year Book - 2011
This was primarily due to an 18.0% decline in interest expense and Islamic financing expense, partially offset by a 0.8% fall in total interest income. Net interest income after loan loss provision
remained flat at AED1.8 billion. Net income increased 4.1% YoY to AED2.6 billion, benefitting from
higher commission, fee and rental income, partially offset by decline in share of profits of associates and increase in loan loss provisions.
Comments/Outlook
As part of its strategic plan to derive future growth, First Gulf intends to focus more on the UAE
nationals (through a UAE national centric strategy). International expansion is a part of the company’s diversification strategy, with a focus on fast growing markets. The bank is looking at future
acquisition opportunities in the UK and Chinese markets. Significant price corrections in the property sector, loan defaults and higher provisioning had impacted UAE’s banking sector. However,
during 3Q2010, most banks were seen recovering from the downturn, and registered higher
growth in the loan book, customer deposits and net income. The UAE government is taking measures to improve the banking sector’s financial health and transparency. Recent guidelines by the
central bank require a lender to book provisions covering non-performing loans on a quarterly
basis instead of year-end (which used to be followed earlier). The new directives also require lenders to generate provisions equivalent to 1.5% of risk-weighted assets over a four-year period, compared to 1.25% earlier. This is likely to help in improving the health of the banking sector.
Financials
Exhibit 88: Income Statement (in AED million)
2006
2007
2008
2009
9M2010
Interest Income, Bank
2,884
3,603
4,957
6,490
4,853
Total Interest Expense
1,676
2,272
2,377
2,656
1,701
Net Interest Income
1,208
1,331
2,581
3,834
3,152
132
207
566
1,680
1,310
1,076
1,124
2,014
2,153
1,843
860
1,494
2,118
2,240
1,520
Loan Loss Provision
Net Interest Inc. After Loan Loss Prov.
Non-Interest Income, Bank
Non-Interest Expense, Bank
(400)
(611)
(1,135)
(1,081)
(804)
Net Income Before Taxes
1,536
2,008
2,997
3,313
2,558
Provision for Income Taxes
Net Income After Taxes
Minority Interest
0
0
0
0
0
1,536
2,008
2,997
3,313
2,558
0
0
8
(3)
(3)
Net Income
1,536
2,008
3,005
3,310
2,555
EPS (Basic)
1.12
1.46
2.10
2.23
1.74
Source: Reuters Knowledge
80
MENA Year Book - 2011
Exhibit 89: Balance Sheet (in AED million)
Cash & Due from Banks
Other Earning Assets, Total
2006
2007
2008
2009
9M2010
16,383
13,163
7,842
10,174
15,575
5,611
13,032
13,971
19,482
21,590
24,805
44,409
79,363
90,386
95,577
Property, Plant and Equipment, Total - Net
334
1,526
2,012
639
632
Long Term Investments
255
326
553
561
561
Net Loans
Other Assets, Total
371
741
3,780
4,231
3,519.73
Total Assets
47,759
73,198
107,522
125,473
137,454
Total Deposits
34,732
55,042
81,275
88,362
97,912
287
461
466
368
-
3,398
5,785
5,785
9,820
11,191
-
0
374
385
387
Other Bearing Liabilities
Long Term Debt
Minority Interest
Other Liabilities, Total
358
1,789
3,376
4,020
4,298
Total Liabilities
38,774
63,077
91,276
102,955
113,788
Common Stock
1,250
1,250
1,375
1,375
1,375
Retained Earnings (Accumulated Deficit)
7,735
8,870
11,333
13,756
19,360
-
-
(45)
(199)
(669)
Treasury Stock - Common
Other Equity
-
-
3,582
7,585
3,600
Total Equity
8,985
10,120
16,245
22,518
23,667
47,759
73,198
107,522
125,473
137,454
Total Liabilities & Shareholders' Equity
Source: Reuters Knowledge
Exhibit 90: Cash Flow Statement (in AED million)
2006
2007
2008
2009
9M2010
Cash from Operating Activities
6,956
(57)
(5,892)
1,863
8,179
Cash from Investing Activities
(2,227)
(7,043)
(3,454)
(3,758)
(2,023)
Cash from Financing Activities
2,494
1,519
3,704
2,635
(107)
Foreign Exchange Effects
Net Change in Cash
Net Cash - Beginning Balance
Net Cash - Ending Balance
0
0
(18)
8
(2)
7,223
(5,581)
(5,660)
748
6,047
9,161
16,383
10,803
5,142
5,890
16,383
10,803
5,142
5,890
11,937
Source: Reuters Knowledge
81
MENA Year Book - 2011
Industries Qatar
Key statistics
Shareholding
Sector: Petrochemicals
Price – 16 Feb 2011
Market Cap (mn)
Qatar Petroleum
70.00%
QAR144.00
Public
25.68%
QAR79,920.00
Others
4.20%
Price 52wk High/Low
QAR153.00/95.00
Foreign ownership limit
25.00%
Ticker: Bloomberg/
Reuters
IQCD QD/IQCD.QA
Shares Outstanding
555.00 mn
Exhibit 91: Share Price Chart – 1 year (in QAR)
160
140
120
100
80
Feb-10
Apr-10
Jul-10
Sep-10
Dec-10
Feb-11
Source: Zawya
Business Description
Industries Qatar, incorporated on April 19, 2003, operates in four distinct segments: petrochemicals, fertilizers, steel, and real estate and property development. The company’s subsidiaries and
joint ventures include: Qatar Petrochemical Company Limited (QAPCO) that manufactures and
markets ethylene, polyethylene, hexane and other related products; Qatar Fertilizer Company
(QAFCO) which is engaged in the manufacture and marketing of ammonia and urea; Qatar Steel
Company (QS) that manufactures hot bricked iron, direct reduced iron, steel billets, bars and coils;
Qatar Fuel Additives Company Limited (QAFAC) which is involved in the production and export of
methyl tertiary-butyl-ether and methanol; and Fereej Real Estate Company (FEREEJ) which undertakes real estate investment, management and rental activities. The company is 70% owned by
Qatar Petroleum, a state owned enterprise.
Financial performance
Industries Qatar’s revenues grew 19.6% YoY to QAR8.5 billion in 9M2010, primarily led by the petrochemicals segment that contributes a little more than a third to total revenues.
82
MENA Year Book - 2011
Net profit and EPS for the first nine months of 2010 stood at QAR4.1 billion and QAR7.37, respectively, an increase of 5.9% compared to the year-ago period. In fact, when we exclude the QAR1.2
billion claim received by the company’s steel subsidiary from the government in 2009, the YoY
growth stands at a remarkable 52.6%.
Comments/Outlook
Industries Qatar is targeting to double its group sales to over QAR20 billion by 2014, which translates into an average growth rate of 16%. The company is building new facilities and expanding
existing ones across all segments in an attempt to support this growth, Some of Industries Qatar’s
major projects are QAFCO V (QAR9.6 billion), Qatofin LLDPE & Ras Laffan Olefin Cracker (QAR2.6
billion) and QAFCO VI (QAR1.7 billion).
However, Industries Qatar’s most ambitious capital investment plans exist within the steel segment, which may entail an outlay of approximately QAR9.8 billion. Qatar Steel is looking at building new facilities – a move that could significantly increase the tonnage of billets and bars as well
as widen product range to include galvanized wire, PC strands and coil.
Financials
Exhibit 92: Income Statement (in QAR million)
Total Revenue
% Change
2006
2007
2008
2009
9M2010
7,778
9,326
14,743
9,657
8,479
18%
20%
58%
-35%
20%
Cost of Sales
4,092
4,395
7,413
5,757
4,348
Gross Profit
3,686
4,931
7,331
3,900
4,131
Margin %
47%
53%
50%
40%
49%
SG&A expenses total
414
456
554
534
507
0
0
39
43
0
Depreciation/Amortization
Operating Income
3,272
4,475
6,738
3,323
3,625
Margin %
42.1%
48.0%
45.7%
34.4%
42.7%
Interest Expense, Net Non-Operating
(44)
(80)
(144)
(100)
(102)
Interest/Invest Income - Non-Operating
194
297
589
411
211
Other, Net
Net Income Before Taxes
Provision for Income Taxes
200
292
94
1,369
322
3,622
4,985
7,277
5,003
4,055
0
0
0
125
0
Net Income After Taxes
3,622
4,985
7,277
4,878
4,055
Net Margin %
46.6%
53.4%
49.4%
50.5%
47.8%
(3)
(1)
(2)
(2)
(2)
Net Income
3,619
4,983
7,276
4,876
4,053
EPS (Basic)
6.58
9.06
13.23
8.86
7.37
Minority Interest
Source: Reuters Knowledge
83
MENA Year Book - 2011
Exhibit 93: Balance Sheet (in QAR million)
2006
2007
2008
2009
9M2010
Cash and Short Term Investments
4,653
6,274
9,691
5,965
4,481
Total Receivables, Net
1,693
1,906
1,864
2,019
2,660
Total Inventory
1,142
1,373
2,521
1,377
1,770
Other Current Assets, Total
0
0
0
0
0
7,489
9,553
14,076
9,360
8,910
Property/Plant/Equipment, Total - Gross
14,188
NA
NA
NA
NA
Accumulated Depreciation, Total
(7,802)
NA
NA
NA
NA
6,386
8,640
11,324
15,633
18,173
72
72
72
96
96
Long Term Investments
771
1,772
1,859
1,898
2,341
Other Long Term Assets, Total
163
104
119
135
132
Total Current Assets
Property/Plant/Equipment, Total - Net
Intangibles, Net
Total Assets
14,880
20,142
27,450
27,121
29,652
Accounts Payable
592
2,019
1,367
1,117
1,012
Notes Payable/Short Term Debt
205
1,084
2,668
307
311
Other Current liabilities, Total
878
746
1,024
506
618
Total Current Liabilities
1,675
3,849
5,059
1,930
1,942
Long Term Debt
1,962
2,358
3,369
5,692
6,851
12
11
11
13
13
Minority Interest
Other Liabilities, Total
159
257
767
439
811
Total Liabilities
3,808
6,475
9,207
8,074
9,617
Common Stock, Total
5,000
5,000
5,500
5,500
5,500
Retained Earnings (Accumulated Deficit)
6,072
8,667
12,743
13,547
14,534
Total Equity
11,072
13,667
18,243
19,047
20,034
Total Liabilities & Shareholders' Equity
47,759
73,198
107,522
125,473
137,454
Source: Reuters Knowledge
Exhibit 94: Cash Flow Statement (in QAR million)
2006
2007
2008
2009
9M2010
Cash from Operating Activities
4,101
6,074
5,614
4,216
NA
Cash from Investing Activities
(2,411)
(4,310)
(3,936)
(2,038)
NA
Cash from Financing Activities
(1,243)
(1,228)
594
(3,274)
NA
Foreign Exchange Effects
0
0
0
0
NA
447
537
2,272
(1,096)
NA
Net Cash - Beginning Balance
2,680
3,127
3,664
5,936
NA
Net Cash - Ending Balance
3,127
3,664
5,936
4,840
NA
Net Change in Cash
Source: Reuters Knowledge
84
MENA Year Book - 2011
Masraf Al Rayan
Key statistics
Shareholding
Sector: Banking
Price – 16 Feb 2011
QAR23.31
Market Cap (mn)
QAR17,482.50
Price 52wk High/Low
QAR25.30/12.00
Ticker: Bloomberg/
Reuters
MARK QD/MARK.SE
Public
73.55%
Qatar Investment
Authority
10.00%
Qatar Special Projects
2.30%
Foreign ownership limit
49.00%
Shares Outstanding
750.00 mn
Exhibit 95: Share Price Chart – 1 year (in QAR)
25
20
15
10
5
Feb-10
Apr-10
Jul-10
Sep-10
Nov-10
Feb-11
Source: Zawya
Business Description
Established in 2006, Masraf Al Rayan is a Qatar-based public shareholding company engaged in the
provision of banking, financial and investment services in accordance to the Islamic Sharia principles. The bank operates through a network of eight branches, 27 ATMs and a total of 325 employees across Qatar. Masraf Al Rayan is structured into four main business divisions: Retail Banking,
Corporate Banking, Al Rayan Investment and Private Banking. Retail Banking offers current and
savings accounts, time deposit accounts, financing, credit cards, kid’s accounts, and pay & go prepaid cards. Corporate Banking offers corporate finance and advisory services, financing products,
cash management, treasury and trade finance. Al Rayan Investment offers asset management, real
estate and financial advisory. Private Banking offers solutions in areas of investment planning and
asset management, wealth management, credit planning and management, cash management,
and business planning.
Financial performance
In 2010, Masraf Al Rayan's interest income grew 48.2% YoY to QAR1.7 billion, driven by rise in
income from financing (up 49.5% YoY) and investing activities (28.4% YoY). revenues.
85
MENA Year Book - 2011
Total operating income rose 23.7% YoY to QAR1.9 billion due to higher interest income and increased gains from forex operations. Net income grew 37.5% YoY to QAR1.2 billion due to positive
impact from decline in impairment losses on receivables from financing activities, decrease in impairment losses on assets and an increase in recoveries of impairment losses on assets.
Comments/Outlook
Masraf Al Rayan plans to develop new Islamic Sharia-compliant products and add innovative features to existing market products. The bank aims to expand its operations both inside and outside
Qatar through additional financing, promoting international offerings and offering expert advisory
services. Masraf Al Rayan also plans to build up Corporate Banking and Al Rayan Investment divisions by offering differentiated financial services and products. The next phase of growth is to
create an investment banking platform, connecting the GCC and Asia with a two-way flow of capital. To facilitate this, Al Rayan Investment proposes to launch new investment products and add
relevant resources. The company also plans to diversify its customer base and build relationships
with companies in Qatar that share a unique vision and have a well-drafted future growth plan.
Financials
Exhibit 96: Income Statement (in QAR million)
2006
2007
2008
2009
2010
Interest Income, Bank
179
1,437
1,328
1,150
1,705
Total Interest Expense
1
133
250
437
571
178
1,305
1,079
713
1,134
0
8
0
9
1
178
1,297
1,079
705
1,132
0
86
100
390
95
Non-Interest Expense, Bank
(65)
(190)
(262)
(214)
(16)
Net Income Before Taxes
113
1,192
917
881
1,211
0
0
0
0
0
Net Income
113
1,192
917
881
1,211
EPS (Basic)
0.15
1.59
1.22
1.17
1.62
Net Interest Income
Loan Loss Provision
Net Interest Inc. After Loan Loss Prov.
Non-Interest Income, Bank
Provision for Income Taxes
Source: Reuters Knowledge
86
MENA Year Book - 2011
Exhibit 97: Balance Sheet (in QAR million)
Cash & Due from Banks
Other Earning Assets, Total
Net Loans
Property, Plant and Equipment, Total - Net
Long Term Investments
Other Assets, Total
Total Assets
Total Deposits
Other Bearing Liabilities, Total
Long Term Debt
2006
2007
2008
2009
2010
25
457
501
716
1,482
9
36
47
48
141
4,280
9,639
16,147
23,174
32,589
10
50
85
83
87
0
10
61
212
386
0
0
(73)
(109)
(2)
4,324
10,191
16,769
24,124
34,683
23
406
414
1,470
1,292
200
4,537
10,484
16,361
25,724
0
0
0
0
0
22
90
177
331
540
Total Liabilities
245
5,033
11,075
18,162
27,557
Common Stock
3,750
3,750
4,125
4,125
5,073
329
659
951
888
77
Other Liabilities, Total
Retained Earnings (Accumulated Deficit)
Other Equity
0
750
619
949
1,976
Total Equity
4,079
5,159
5,694
5,962
7,126
Total Liabilities & Shareholders' Equity
4,324
10,191
16,769
24,124
34,683
Source: Reuters Knowledge
Exhibit 98: Cash Flow Statement (in QAR million)
Cash from Operating Activities
2006
2007
2008
2009
2010
(3,994)
(6,021)
(7,133)
(1,873)
(6,942)
Cash from Investing Activities
(149)
229
263
(188)
(1,462)
Cash from Financing Activities
4,165
8,502
5,576
5,254
9,363
Foreign Exchange Effects
Net Change in Cash
Net Cash - Beginning Balance
Net Cash - Ending Balance
0
0
0
0
0
22
2,710
(1,294)
3,193
959
0
0
2,710
1,416
4,609
22
2,710
1,416
4,609
5,568
Source: Reuters Knowledge
87
MENA Year Book - 2011
Mobile Telecommunications Company (Zain)
Key statistics
Shareholding
Sector: Telecommunications
Price – 16 Feb 2011
KWD1.38
Market Cap (mn)
KWD5,923.59
Price 52wk High/Low
KWD1.56/0.93
Ticker: Bloomberg/
Reuters
ZAIN KK/ZAIN.KW
Public
58.22%
Kuwait Investment Authority
24.61%
Mohamed Abdulmohsin Al
12.67%
Foreign ownership limit
Shares Outstanding
100.00%
4,292.46 mn
Exhibit 99: Share Price Chart – 1 year
1.6
1.5
1.3
1.2
1.0
Feb-10
Apr-10
Jul-10
Sep-10
Nov-10
Feb-11
Source: Zawya
Business Description
Mobile Telecommunications Company (Zain), established in 1983, is a Kuwait-based telecom conglomerate with presence in eight countries across the Middle East and North Africa (MENA) region. The company offers a comprehensive range of mobile voice and data services to over 35.3
million business and individual customers. The company operates under the brand names of
“Zain” (in Bahrain, Jordan, Kuwait, Iraq, Saudi Arabia and Sudan) and “MTC Touch” (in Lebanon).
Kuwait Investment Authority is the largest shareholder (24.6%) of the company. In June 2010, Zain
sold 100% of Zain Africa BV to Indian telecom operator Bharti Airtel Limited (Bharti) for a consideration of US$10.7bn. Following this, Bharti gained access to 15 countries in Africa.
Financial performance
Zain’s top line expanded 8.3% YoY to KWD1bn in 9M2010, led by increased subscriber base
(notably in Iraq, Sudan and KSA). In 3Q2010, the company’s customer base in the Middle East
reached 35.3mn, depicting a growth of 25% compared to the year-ago period. Iraq was the largest
contributor (31%) to total revenues. The country recorded an increase of 17% YoY in customer
base to 11.7mn – the largest for Zain in any nation – at the end of 3Q2010. The company reported
a 17% YoY increase in total operating expenses to KWD686.2mn. Zain’s operating margin declined
to 32% in 9M2010 from 37.1% during the year-ago period.
88
MENA Year Book - 2011
Consequently, the company’s operating income fell 6.5% YoY to KWD323.6mn in 9M2010. Nevertheless, Zain’s bottom line benefited from several provision reversals and higher foreign currency
adjustment gains. As a result, the company’s net income (excluding the extraordinary gains) increased 28.3% YoY to KWD233.8mn in 9M2010. Net income growth was also supported by capital
gain worth KWD741.8mn from the sale of Zain Africa to Bharti in June 2010. Including this, Zain’s
net profit surged 412.2% YoY to KWD975.6mn during 9M2010.
Comments/Outlook
Zain’s outlook has been lately driven by UAE-based telecom operator Emirates Telecommunications Corp (Etisalat)’s bid to acquire a 46% stake in the company at KWD1.7 per share, valuing the
deal at around US$12bn. The offer was made to Zain's second-largest shareholder, Kharafi Group,
which holds around 13% stake in the company. Although the offer is subject to a number of conditions, it is expected to be a key factor impacting Zain’s share price movement in the short- to medium-term. While the company is expected to grow organically, the deal provides excellent integration opportunities for Etisalat’s operations. This is because geographic footprint of the company largely complements that of Etisalat. However, Zain has been an attractive target for many
telecom giants across the region. Çukurova, a Turkish conglomerate, is also in talks to buy a large
stake in Zain. Hence, the near-term prospects for Zain depend on the outcome of this stake acquisition pursuit.
Financials
Exhibit 100: Income Statement (in KWD million)
Total Revenue
Cost of Revenue
2006
2007
2008
2009
9M2010
1,297
1,677
2,003
2,318
1,010
275
381
571
640
267
Gross Profit
1,023
1,296
1,432
1,679
742
Margin (%)
78.8%
77.3%
71.5%
72.4%
73.5%
Selling/General/Administrative Expense
455
608
685
752
295
Depreciation/Amortization
162
236
303
398
124
Impairment-Assets Held for Use
6
0
63
23
0
Total Operating Expense
898
1,226
1,622
1,813
686
Operating Income
399
452
381
505
324
32
45
163
(60)
(29)
Interest Income (Expense)
Foreign Currency Adjustment
3
13
(37)
(38)
24
Other Non-Operating Income (Expense)
(79)
(118)
(107)
(149)
(35)
Net Income Before Taxes
356
392
400
258
284
Provision for Income Taxes
Net Income After Taxes
Margin (%)
42
49
63
46
35
314
343
337
211
249
24.2%
20.4%
16.8%
9.1%
24.7%
Minority Interest
(19)
(22)
(15)
(16)
(15)
Net Income Before Extra. Items
295
320
322
195
234
0
0
0
0
742
Discontinued Operations
Net Income
295
320
322
195
976
EPS (Excluding extra. Items)
0.08
0.09
0.09
0.05
0.06
EPS (Including extra. Items)
0.08
0.09
0.09
0.05
0.25
Source: Reuters Knowledge
89
MENA Year Book - 2011
Exhibit 101: Balance Sheet (in KWD million)
Cash and Short Term Investments
2006
2007
2008
2009
9M2010
493
284
385
275
643
Accounts Receivable - Trade, Gross
224
289
405
457
0
Provision for Doubtful Accounts
(39)
(43)
(50)
(51)
0
Total Receivables, Net
184
246
355
405
521
15
22
30
33
13
Total Inventory
Other Current Assets
0
0
80
0
0
692
553
850
713
1,178
Property/Plant/Equipment, Total - Gross
1,705
2,273
3,135
3,582
0
Accumulated Depreciation, Total
(574)
(778)
(1,108)
(1,431)
0
Property/Plant/Equipment, Total - Net
1,131
1,496
2,027
2,152
776
Goodwill, Net
1,315
0
1,659
1,704
0
Intangibles, Net
163
1,637
576
541
1,352
Long Term Investments
143
439
313
308
263
47
242
91
279
184
Total Current Assets
Other Long Term Assets, Total
Total Assets
3,491
4,367
5,516
5,697
3,753
Accounts Payable
427
558
970
940
575
Notes Payable/Short Term Debt
461
454
231
536
182
Other Current liabilities, Total
155
19
0
0
13
1,043
1,030
1,201
1,476
770
921
1,532
1,671
1,616
108
1,382
1,985
1,902
2,152
290
10
32
30
39
0
146
166
182
182
92
16
25
212
87
150
Total Liabilities
2,137
2,785
3,296
3,400
1,120
Common Stock
126
189
427
428
429
Additional Paid-In Capital
624
624
1,691
1,691
1,698
Retained Earnings (Accumulated Deficit)
644
810
767
766
1,143
Treasury Stock - Common
(16)
(16)
(568)
(568)
(568)
Translation Adjustment
(24)
(26)
(98)
(21)
(69)
Total Equity
1,354
1,582
2,219
2,297
2,633
Total Liabilities & Shareholders' Equity
3,491
4,367
5,516
5,697
3,753
2009
9M2010
Total Current Liabilities
Long Term Debt
Total Debt
Deferred Income Tax
Minority Interest
Other Liabilities, Total
Source: Reuters Knowledge
Exhibit 102: Cash Flow Statement (in KWD million)
2006
Cash from Operating Activities
Cash from Investing Activities
2007
2008
802
672
668
848
367
(992)
(1,056)
(697)
(709)
1,861
Cash from Financing Activities
360
184
135
(253)
(2,028)
Net Change in Cash
181
(213)
107
(101)
196
Net Cash - Beginning Balance
293
474
261
368
267
Net Cash - Ending Balance
474
261
368
267
464
Source: Reuters Knowledge
90
MENA Year Book - 2011
National Bank of Kuwait SAK
Key statistics
Shareholding
Sector: Banking
Price – 16 Feb 2011
Public
100.00%
Foreign ownership limit
49.00%
KWD1.38
Market Cap (mn)
KWD4,892.47
Price 52wk High/Low
KWD1.48/0.99
Ticker: Bloomberg/
Reuters
NBK KK/NBK.KSE
Shares Outstanding
3,545.27 mn
Exhibit 103: Share Price Chart – 1 year (in KWD)
1.6
1.4
1.2
1.0
0.8
Feb-10
Apr-10
Jul-10
Sep-10
Nov-10
Feb-11
Source: Zawya
Business Description
Incorporated in 1952 as the first native bank in the Gulf region, National Bank of Kuwait (NBK) is a
Kuwait-based public shareholding company. It offers banking, financial and investment services in
Kuwait and 17 other countries (across GCC and international markets). The bank provides its services through three main divisions: Consumer Banking, Corporate Banking, and Investment Banking & Asset Management.
The Consumer Banking division provides a diversified range of retail and commercial banking products and services to individuals, including loans, credit cards, deposit accounts, foreign exchange
and other related services. The Corporate Banking division provides comprehensive products and
services to business and corporate customers. These include lending, deposits, trade finance, foreign exchange and advisory services. The Investment Banking & Asset Management division offers
a range of capital market advisory and execution services such as wealth and asset management,
custody, brokerage and research services. NBK is the largest bank in Kuwait; it has assets totaling
more than US$43.4 billion and over 30% market share in all business segments. With 69 branches
and 205 ATMs, NBK also has the largest and most diversified distribution network in Kuwait as of
June 2010.
91
MENA Year Book - 2011
Financial performance
For the fiscal year ended December 31, 2010, NBK's net interest income fell 4.8% YoY to
KWD358.8 million, primarily due to a decline in interest income (11.9% YoY), partially offset by a
decrease in interest expense (27.5% YoY). Operating expenses fell 11.6% YoY to KWD159.1 million
due to reduction in staff and other administrative expenses. Net income rose 13.7% YoY to
KWD301.7 million due to an increase in dividend income and other operating income as well as a
decline in operating expenses.
Comments/Outlook
In the medium-term, NBK aims to expand its operations outside Kuwait and contribute 50% of the
bank’s net profits by 2012. The bank plans to capitalize on its wide international reach and relationships in the Kuwaiti and MENA markets to support growth in the Gulf region. As part of its
international expansion initiatives, NBK plans to follow a selective approach for new acquisitions,
wherein it has a competitive advantage, as well as focus on high-growth economies with favorable
demographic trends. The bank plans to increase its corporate business by targeting international
and regional companies focusing on the MENA region. Expansion of the bank’s regional presence
and distribution channels in the MENA region is also a key part of its diversification strategy. The
economic crisis had impacted the overall GDP growth and government earnings in Kuwait, but
Central Bank’s measures such as lowering interest rates and deposit guarantee helped to
strengthen the banking sector. Also, the economic growth is back on track due to revival in oil
prices.
Financials
Exhibit 104: Income Statement (in KWD million)
2006
2007
2008
2009
2010
Interest Income, Bank
478
608
684
547
482
Total Interest Expense
217
325
318
170
123
Net Interest Income
262
284
367
377
359
Loan Loss Provision
Net Interest Inc. After Loan Loss Prov.
31
24
81
37
12
231
260
286
339
347
Non-Interest Income, Bank
134
141
142
142
140
Non-Interest Expense, Bank
(99)
(113)
(159)
(198)
(167)
Net Income Before Taxes
265
287
269
283
320
12
12
11
16
17
254
275
258
267
303
(1)
(2)
(2)
(1)
(1)
Provision for Income Taxes
Net Income After Taxes
Minority Interest
Net Income
253
274
255
265
302
EPS (Basic)
0.10
0.10
0.09
0.08
0.09
Source: Reuters Knowledge
92
MENA Year Book - 2011
Exhibit 105: Balance Sheet (in KWD million)
2006
2007
2008
2009
2010
846
1,778
1,399
1,622
1,172
Other Earning Assets, Total
2,528
3,286
2,996
2,582
2,894
Net Loans
4,310
5,920
6,955
7,817
7,853
90
105
133
153
174
0
245
243
250
174
Cash & Due from Banks
Property, Plant and Equipment, Total - Net
Goodwill, Net
Intangibles, Net
Long Term Investments
Other Assets, Total
0
0
0
0
55
32
74
128
388
504
93
131
119
96
73
Total Assets
7,898
11,539
11,973
12,907
12,899
Total Deposits
6,680
9,619
10,168
10,869
10,459
0
0
0
0
0
Long Term Debt
Minority Interest
6
9
11
13
13
152
225
237
199
209
Total Liabilities
6,839
9,854
10,416
11,082
10,681
Common Stock
195
246
270
297
360
Additional Paid-In Capital
200
569
569
569
700
Retained Earnings (Accumulated Deficit)
676
840
880
1,007
1,140
Treasury Stock - Common
(24)
0
(154)
(59)
(12)
Other Liabilities, Total
Other Equity
12
31
(8)
11
31
Total Equity
1,060
1,686
1,558
1,825
2,218
Total Liabilities & Shareholders' Equity
7,898
11,539
11,973
12,907
12,899
Source: Reuters Knowledge
Exhibit 106: Cash Flow Statement (in KWD million)
2006
2007
2008
2009
2010
335
940
430
484
(244)
Cash from Investing Activities
(130)
(341)
(463)
(241)
(275)
Cash from Financing Activities
60
336
(342)
(44)
95
Cash from Operating Activities
Foreign Exchange Effects
0
(3)
(5)
24
(26)
Net Change in Cash
265
933
(379)
223
(450)
Net Cash - Beginning Balance
580
846
1,778
1,399
1,622
Net Cash - Ending Balance
846
1,778
1,399
1,622
1,172
Source: Reuters Knowledge
93
MENA Year Book - 2011
Orascom Construction Industries SAE
Key statistics
Shareholding
Sector: Construction
Price – 27 Jan 2011
EGP227.07
Market Cap (mn)
EGP46,984.98
Price 52wk High/Low
EGP294.5/215.0
Ticker: Bloomberg/
Reuters
OCIC EY/OCIC.SE
Nassef Onsi Najib Sawiris and
family
55.00%
Public
33.82%
Infrastructure and Growth
Capital Fund
Foreign ownership limit
Shares Outstanding
6.17%
100.00%
206.92 mn
Exhibit 107: Share Price Chart – 1 year
300
275
250
225
200
Feb-10
Apr-10
Jun-10
Sep-10
Nov-10
Jan-11
Source: Zawya
Business Description
Orascom Construction Industries (OCI) was founded in 1976 and listed on the Egyptian Stock Exchange (EGX), formerly Cairo and Alexandria Stock Exchange, in 1999. OCI is primarily involved in
construction related activities and production of nitrogen-based fertilizers. The Construction segment’s activities mainly include contracting; manufacturing; engineering services; supply and installation of machinery, equipment and tools; and supply of materials required for construction
activities in Egypt and internationally. OCI also undertakes residential, industrial, commercial and
infrastructure projects for public and private customers in Europe, the Middle East and North Africa. The segment’s total production capacity equates to 120,000 tons of fabricated steel per year.
The Fertilizer segment produces different types of nitrogen-based fertilizers, including urea and
ammonia, with a production capacity of 2.0 million tons. The Cement segment manufactures cement, aggregates, ready-mix concrete and cement bags in Egypt, Algeria, northern Iraq, Pakistan,
the UAE, Turkey and Spain. The company’s employee strength stood at 86,000 as of May 28, 2010.
Financial performance
For the nine months ended September 30, 2010, OCI's total revenue increased 26.6% y-o-y to
EGP20.0 billion, driven by higher sales in the Fertilizer and Construction segments.
94
MENA Year Book - 2011
Product sales exceeded 2.6 million metric tons in the Fertilizer segment, whereas the Construction
segment reported a construction backlog of EGP110.1 billion and won new awards worth EGP12.1
billion during the first nine months of 2010. The company’s net income rose 18.3% y-o-y to EGP2.3
billion, primarily due to an increase in investment income from Gavilon and decline in interest
expenses, partially offset by lower interest income.
Comments/Outlook
OCI focuses on expanding the Fertilizer business—construction of Sorfert Algerie’s greenfield fertilizer plant (wherein OCI holds 51% stake) is currently underway. The plant’s progress is on-track
with 95.6% completion at the end of September 2010; commissioning is expected to take place in
the first half of 2011. With the commencement of production at this plant, OCI’s aggregate production capacity is estimated to increase to 7.7 million tons per annum by 2012. Key production
capacities will likely include 3.3 million tons of urea, two million tons of ammonia and 1.45 million
tons of calcium ammonium nitrate. The company expects growth in the Construction segment due
to high entry barriers, thereby ensuring a competitive edge in its core geographical markets, and
proposed government spending worth trillions of dollars in the markets where it has a presence.
OCI is currently one of the leading contractors in the MENA region and is expected to be ranked
among the top three nitrogen fertilizer producers by 2012.
Financials
Exhibit 108: Income Statement (in EGP million)
2006
2007
2008
2009
9M2010
12,543
13,148
20,253
21,313
19,978
5%
54%
5%
27%
10,206
10,975
14,952
16,581
15,158
2,337
2,173
5,300
4,732
4,820
Margin %
19%
17%
26%
22%
24%
SG&A Expense
750
741
1,093
1,284
1,230
97
82
201
212
402
11,053
11,798
16,246
18,076
16,790
1,490
1,350
4,006
3,237
3,188
12%
10%
20%
15%
16%
(112)
(78)
504
(363)
(158)
Total Revenue
% Change
Cost of Revenue
Gross Profit
Other Operating Expense
Total Operating Expense
Operating Income
Margin %
Interest Inc.(Exp.),Net-Non-Op., Total
Gain (Loss) on Sale of Assets
Other Non-Operating Income (Expense)
Net Income Before Taxes
Provision for Income Taxes
Net Income After Taxes
Net Margin %
Minority Interest
6
9
15
39
8
67
110
49
129
74
1,451
1,391
4,575
3,042
3,113
118
82
576
491
619
1,333
1,309
3,999
2,550
2,495
11%
10%
20%
12%
12%
(743)
(109)
(77)
(134)
(214)
590
1,201
3,922
2,417
2,280
Discontinued Operations
2,081
64,821
1,445
0
0
Net Income
2,671
66,021
5,367
2,417
2,280
3.01
5.98
18.87
11.74
11.08
Net Income Before Extra. Items
EPS
Source: Reuters Knowledge
95
MENA Year Book - 2011
Exhibit 109: Balance Sheet (in EGP million)
2006
2007
2008
2009
9M2010
3,211
3,989
8,432
6,136
7,876
Total Receivables, Net
5,989
6,176
9,430
11,273
13,905
Total Inventory
1,437
673
1,398
1,335
1,772
371
78,902
599
605
592
15,545
3,473
9,912
14,991
18,113
Cash and Short Term Investments
Other Current Assets, Total
Property, Plant and Equipment, Total - Net
Goodwill, Net
0
0
9,907
9,871
10,374
820
65
3
3
489
Long Term Investments
927
1,576
3,053
2,358
2,754
Note Receivable - Long Term
222
76
255
247
432
Intangibles, Net
Other Long Term Assets, Total
Total Assets
93
22
36
38
58
28,616
94,952
43,026
46,858
56,365
Accounts Payable
6,383
5,529
9,918
12,152
4,313
Current portion of long term debt
2,988
10,648
3,671
2,266
7,757
494
1,174
1,090
1,011
10,919
6,262
1,035
7,754
11,219
12,332
338
103
507
582
744
Other Current liabilities, Total
Long Term Debt
Deferred Income Tax
Minority Interest
2,488
1,049
227
750
915
991
2,568
2,505
2,484
2,744
Total Liabilities
19,945
22,105
25,671
30,465
39,725
Common Stock
1,010
1,010
1,074
1,035
1,035
Retained Earnings (Accumulated Deficit)
7,646
71,920
18,034
15,573
15,933
Treasury Stock - Common
(137)
(94)
(1,668)
(200)
(200)
Other Long Term Liabilities
Other Equity
153
12
(86)
(15)
(127)
Total Equity
8,672
72,847
17,355
16,393
16,641
28,616
94,952
43,026
46,858
56,365
2009
9M2010
Total Liabilities & Shareholders' Equity
Source: Reuters Knowledge
Exhibit 110: Cash Flow Statement (in EGP million)
2006
2007
2008
Cash from Operating Activities
3,090
927
2,578
3,186
1,014
Cash from Investing Activities
(7,918)
(7,654)
64,517
(4,616)
(3,491)
Cash from Financing Activities
5,397
7,906
(62,743)
(1,073)
4,316
0
0
0
159
(99)
Foreign Exchange Effects
570
1,179
4,352
(2,344)
1,740
Net Cash - Beginning Balance
Net Change in Cash
2,168
2,738
3,917
8,269
5,925
Net Cash - Ending Balance
2,738
3,917
8,269
5,925
7,664
Source: Reuters Knowledge
96
MENA Year Book - 2011
Qatar Electricity & Water Co
Key statistics
Shareholding
Sector: Electric Utilities
Price – 16 Feb 2011
QAR129.40
Market Cap (mn)
QAR12,940.00
Price 52wk High/Low
QAR138.5/96.0
Public
58.00%
Government of Qatar
42.00%
Foreign ownership limit
25.00%
Shares Outstanding
Ticker: Bloomberg/
Reuters
100.00 mn
QEWS QD/QEWC.QA
Exhibit 111: Share Price Chart – 1 year
140
130
120
110
100
90
Feb-10
Apr-10
Jul-10
Sep-10
Nov-10
Feb-11
Source: Zawya
Business Description
Established in 1990, Qatar Electricity & Water Company (QEWC) is a Qatar-based public shareholding company that operates in the field of power and water production. The company owns and
operates power generation and water desalination plants. It holds capital shares in a number of
jointly-owned projects by local and international companies. It also holds stakes in five Qatarbased companies, namely AES Ras Laffan Operating Company WLL, Ras Laffan Power Company
Limited QSC, Q Power QSC, Mesaieed Power Company Ltd and Ras Girtas Power Company Ltd.
QEWC owns and operates electricity generation plants with a total installed capacity of 2,187
megawatts (MW) and water desalination plants with a capacity of 217 million gallons per day (as
of Dec 2007).
Financial performance
For the nine months ended 30 September 2010, QEWC's total revenue increased 19.9% YoY to
QAR2.34 billion. Revenue from water desalination plants grew 17.1% to QAR802.1 million, while
those from electricity sales rose 7.6% to QAR1.2 billion. Net income increased 16.0% to QAR834.5
million primarily due to higher revenues, rise in interest and other operating income, and decreased G&A expenses, partially offset by a significant rise in finance costs, higher damages costs
of KAHRAMMA as well as lower dividend income.
97
MENA Year Book - 2011
Comments/Outlook
QEWC has adopted a 10-year long-term plan (financial policy) in order to ascertain its financial
position and cash flows, generate equitable returns for its shareholders and optimally utilize the
company’s financial resources in the field of power generation and water desalination. The company is also concentrating on overseas investment opportunities by participating in new power
and water projects in association with leading international names in these sectors. QEWC recently completed two projects (Ras Abu Fontas Station - A1 Project and Mesaieed Power Project)
and has one project under construction (Ras Girtas Project). The company has 100% ownership In
the Ras Abu Fontas Station project, which was completed at the end of December 2010. Through
this project, the company aims to increase the total capacity of the plant to 70 MIGD, adding 45
MIGD of desalinated water. In the other two projects, the company has a partial ownership stake.
Masaieed Power Project was completed in April 2010 (comprising a 2,000 MW power plant), while
the Ras Girtas Project (expected to have an hourly output capacity of 2,730 MW of electricity and
63 MIGD of water) is expected to be completed by April 2011. The company’s expansion plans are
in sync with the growing demand in the region and they aim to increase the power generation
capacity from 7,600 MW during 3Q2010 to 9,000 MW on a consolidated basis by 2011.
Financials
Exhibit 112: Income Statement (in QAR million)
Total Revenue
2006
2007
2008
2009
9M2010
1,714
1,927
2,273
2,651
2,345
12%
18%
17%
20%
1,055
1,139
1,346
1,535
1,291
93
93
119
124
111
4
5
12
2
0
(33)
11
12
37
(22)
% Change
Cost of Revenue
SG&A Expense
Depreciation & Amortization
Other Operating Expense
Total Operating Expense
1,118
1,248
1,488
1,698
1,380
Operating Income
596
679
785
953
965
Margin (%)
35%
35%
35%
36%
41%
9
4
(15)
51
264
Other Non-Operating Income (Expense)
166
(69)
(13)
(82)
(395)
Net Income Before Taxes
772
614
757
922
835
Interest Inc.(Exp.),Net-Non-Op., Total
Provision for Income Taxes
Net Income After Taxes
0
0
0
0
0
772
614
757
922
835
Net Margin %
45%
32%
33%
35%
36%
EPS
7.72
6.14
7.57
9.22
8.35
Source: Reuters Knowledge
98
MENA Year Book - 2011
Exhibit 113: Balance Sheet (in QAR million)
Cash and Short Term Investments
2006
2007
2008
2009
9M2010
499
654
1,615
2,307
2,767
Total Receivables, Net
389
323
438
460
687
Total Inventory
329
418
286
274
262
Other Current Assets
11
0
0
0
0
4,730
6,109
9,334
10,664
8,943
418.77
537.92
436.68
522.57
562.45
720
1,148
1,479
3,821
6,905.71
7,097
9,189
13,588
18,048
20,127
176
232
565
645
1,569
Accrued Expenses
185
162
320
418
0
Current portion of long term debt
251
24
805
774
1,895
Property, Plant and Equipment, Total - Net
Long Term Investments
Note Receivable - Long Term
Total Assets
Accounts Payable
Other Current Liabilities
42
471
3,013
1,248
2,619
2,645
4,502
7,484
11,281
11,428
112
90
91
92
93
Total Liabilities
3,412
5,480
12,280
14,458
17,604
Common Stock
1,000
1,000
1,000
1,000
1,000
Long Term Debt
Other Long Term Liabilities
Retained Earnings (Accumulated Deficit)
2,685
2,709
308
2,590
1,523
Total Equity
3,685
3,709
1,308
3,590
2,523
Total Liabilities & Shareholders' Equity
7,097
9,189
13,588
18,048
20,127
2009
9M2010
Source: Reuters Knowledge
Exhibit 114: Cash Flow Statement (in QAR million)
2006
Cash from Operating Activities
2007
2008
362
572
1,408
1,331
999
Cash from Investing Activities
(1,016)
(1,695)
(3,811)
(3,954)
(1,307)
Cash from Financing Activities
754
1,277
3,363
3,315
768
Net Change in Cash
101
155
961
692
460
Net Cash - Beginning Balance
399
499
654
1,615
2,307
Net Cash - Ending Balance
499
654
1,615
2,307
2,767
Source: Reuters Knowledge
99
MENA Year Book - 2011
Qatar Islamic Bank
Key statistics
Shareholding
Sector: Banking
Price – 16 Feb 2011
QAR84.30
Market Cap (mn)
QAR19,121.77
Price 52wk High/Low
QAR91.1/67.9
Public
95.00%
Qatar Investment Authority
5.00%
Foreign ownership limit
25.00%
Shares Outstanding
Ticker: Bloomberg/
Reuters
226.83 mn
QIBK QD/QISB.QA
Exhibit 115: Share Price Chart – 1 year
100
90
80
70
60
Feb-10
Apr-10
Jul-10
Sep-10
Nov-10
Feb-11
Source: Zawya
Business Description
Qatar Islamic Bank (QIB), established in 1982, is the largest Islamic bank in Qatar. The bank has
around 50% share in the country’s Islamic banking assets and 10% in its banking sector. QIB offers
various banking, investment and financing services through various Islamic modes of finance such
as Murabaha, Mudaraba, Musharaka, Musawama and Istisnaa. QIB operates through 27 branches
and more than 100 ATMs in Qatar. Keen on expanding internationally, the bank has built a strong
international presence by picking stakes in a range of finance houses in the Middle East, Europe
and Asia. QIB, for example, has majority stake in the UK’s European Finance House and minority
interest in Malaysia’s Asian Finance Bank.
Financial performance
QIB’s financial performance was subdued in 2010 due to slower growth in net interest income (NII)
and non-interest income (NOI) during the year. The bank’s NII grew 0.6% y-o-y to QAR1.6 billion in
2010, while NOI increased 1.8% y-o-y to QAR0.3 billion. This was despite strong growth in its balance sheet; decreased yields on interest earning assets are likely to have led to slower growth in
NII and NOI. QIB’s loan portfolio increased 31.1% y-o-y to QAR33.7 billion in 2010, while deposits
rose 33.1% y-o-y to QAR38.7 billion during the year. On a positive note, the bank’s cost efficiency
improved with non-interest expense declining 18.5% y-o-y to QAR0.5 billion in 2010.
100
MENA Year Book - 2011
Consequently, QIB’s net income after taxes increased 7.1% y-o-y to QAR1.4 billion. However,
losses from minority interests and equity in affiliates offset the rise to some extent. Consequently,
its net income grew a modest 0.9% y-o-y to QAR1.3 billion in 2010.
Comments/Outlook
Despite its weak performance on the top and bottom-line fronts, QIB recorded strong growth in
balance sheet during 2010. The bank’s growth strategy is to strengthen QIB’s position in the local
market and build presence internationally over a five-year period spanning 2008–12. The bank’s
leading position with a strong retail franchise of 27 branches in the Islamic banking sector in Qatar
is also a positive. Even as QIB’s non-performing loans (NPL) increased 10.5% y-o-y to QAR326 million in 2010, its NPL to gross loans ratio declined to 1.1% from 1.3% in 2009. However, considering
the strong growth in the bank’s loans and increase in delinquencies in sectors such as real estate,
credit cards and personal loans, QIB’s NPLs could rise in the near term.
Financials
Exhibit 116: Income Statement (in QAR million)
Interest Income, Bank
2006
2007
2008
2009
2010
1,130
1,580
2,399
2,092
2,037
Interest on Deposit
258
36
389
510
447
Net Interest Income
872
1,544
2,011
1,581
1,591
Loan Loss Provision
70
1
(48)
31
50
Net Interest Inc. After Loan Loss Prov.
802
1,542
2,059
1,550
1,541
Non-Interest Income, Bank
445
114
155
310
315
Non-Interest Expense, Bank
(208)
(334)
(509)
(576)
(470)
Net Income Before Taxes
1,039
1,323
1,705
1,284
1,387
Provision for Income Taxes
Net Income After Taxes
Minority Interest
Equity In Affiliates
Net Income Before Extra. Items
0
0
0
(11)
0
1,039
1,323
1,705
1,295
1,387
(27)
(67)
(62)
27
(27)
0
0
0
0
(25)
1,012
1,255
1,643
1,322
1,335
Source: Reuters Knowledge
101
MENA Year Book - 2011
Exhibit 117: Balance Sheet (in QAR million)
2006
2007
2008
2009
2010
Cash & Due from Banks
4,244
4,621
7,391
10,241
14,306
Other Short Term Investments
1,016
2,085
1,692
1,203
1,115
Total Investment Securities
1,927
2,117
4,598
3,436
5,012
Total Gross Loans
0
13,294
21,235
25,734
33,746
Loan Loss Allowances
0
(283)
(234)
(264)
(363)
0
(1,332)
(2,135)
(2,807)
(4,031)
7,156
11,679
18,866
22,663
29,352
Unearned Income
Net Loans
Property/Plant/Equipment, Total - Gross
213
206
384
446
551
(105)
(104)
(124)
(147)
(180)
Property/Plant/Equipment, Total - Net
108
102
260
299
371
Other Assets
437
732
737
1,430
1,685
Total Assets
Accumulated Depreciation, Total
14,889
21,336
33,543
39,273
51,840
Accounts Payable
53
0
0
0
0
Accrued Expenses
29
0
0
0
0
Non-Interest Bearing Deposits
6,369
7,816
11,495
13,642
21,527
Interest Bearing Deposits
3,511
7,989
13,794
15,410
17,142
Total Deposits
9,880
15,805
25,289
29,052
38,670
1
0
0
0
0
Other Current liabilities, Total
Long Term Debt
0
0
0
0
2,713
Minority Interest
80
118
226
194
209
Other Liabilities, Total
591
783
886
1,022
1,124
Total Liabilities
10,634
16,707
26,400
30,268
42,716
Common Stock
1,193
1,193
1,969
2,068
2,166
0
0
0
956
0
Additional Paid-In Capital
Retained Earnings (Accumulated Deficit)
3,061
3,436
5,174
5,982
6,958
Total Equity
4,255
4,629
7,143
9,005
9,124
14,889
21,336
33,543
39,273
51,840
2009
2010
Total Liabilities & Shareholders' Equity
Source: Reuters Knowledge
Exhibit 118: Cash Flow Statement (in QAR million)
2006
Cash from Operating Activities
2007
2008
784
253
(856)
(624)
(3,410)
Cash from Investing Activities
(1,304)
(642)
(1,800)
1,666
(1,529)
Cash from Financing Activities
2,936
559
4,304
2,171
8,946
Net Change in Cash
2,417
169
1,648
3,213
4,006
Net Cash - Beginning Balance
1,467
3,884
4,053
5,701
8,913
Net Cash - Ending Balance
3,884
4,053
5,701
8,913
12,919
Source: Reuters Knowledge
102
MENA Year Book - 2011
Qatar National Bank
Key statistics
Shareholding
Sector: Banking
Price – 16 Feb 2011
QAR138.00
Market Cap (mn)
Public
50.00%
Qatar Investment Authority
50.00%
Foreign ownership limit
25.00%
QAR70,226.82
Price 52wk High/Low
QAR155.38/89.69
Shares Outstanding
Ticker: Bloomberg/
Reuters
508.89 mn
QNBK QD/QNBK.QA
Exhibit 119: Share Price Chart – 1 year
160
140
120
100
80
Feb-10
Apr-10
Jul-10
Sep-10
Nov-10
Feb-11
Source: Zawya
Business Description
Qatar National Bank SAQ (QNB) was established in 1964 as the first Qatari-owned commercial
bank with ownership structure split between the Qatar Investment Authority (50%) and the private sector (50%). QNB is the largest bank in Qatar; it holds around 40% market share of the country’s banking sector assets. The bank is engaged in the provision of commercial and Islamic banking services. It offers a range of retail, corporate, investment, treasury, wealth management, and
Islamic banking products and services to individuals, corporate institutions and government entities. QNB has the largest distribution network in the country, with 59 branches and more than 170
ATMs. The bank operates in 23 countries, including branches in Yemen, Oman, Kuwait and Singapore as well as representative offices in Iran and Libya. The bank also recently established an Islamic branch in Sudan, which offers a full range of Islamic banking services and products. QNB’s
subsidiaries include Ansbacher Group Holding Limited (owned through its Luxembourg-based subsidiary holding company), QNB International Holdings Limited, QNB Switzerland, QNB Syria and
QNB Capital LLC.
Financial performance
QNB’s net interest income (NII) rose 52.3% y-o-y to QAR5.7 billion in 2010 led by strong growth in
loan portfolio, which increased 21.1% y-o-y to QAR131.7 billion by the end of 2010.
103
MENA Year Book - 2011
Moreover, the bank’s non-interest income rose 4.9% y-o-y to QAR1.7 billion in 2010 driven by
higher fees and commission income during the year.
The bank was also able to improve its efficiency ratio (cost-to-income) ratio to 16.6% in 2010 from
17.5% in 2009 due to strong operating income and efficient cost management. As a result, QNB
reported a 35.8% y-o-y rise in its bottom line to QAR5.7 billion in 2010.
Comments/Outlook
QNB’s leading market position, strong liquidity profile, close links to the Qatari government and
strong income generating capabilities are its key positives. The bank had a cash balance of
QAR33.9 billion at the end of 2010, adequately placing it to meet any uncertain operational risk.
Moreover, QNB recently announced it would increase its share capital through a rights issue. The
rights issue is expected to further improve its Tier 1 capital ratio, enabling it to spur the growth in
its lending portfolio. This would help the bank to grow at a faster rate. Furthermore, the bank has
reported higher growth in its deposits compared to loans in 2010. This further enhances its ability
to lend more. Also, with a coverage ratio as high as 117.7% in 2010, QNB has sufficiently cushioned
any rise in NPLs (Non-performing loans) resulting from strong expansion of its retail portfolio.
Financials
Exhibit 120: Income Statement (in QAR million)
2006
2007
2008
2009
2010
Interest Income, Bank
3,397
4,623
6,116
6,395
7,890
Interest on Deposit
1,447
1,849
2,071
2,054
2,215
Interest on Other Borrowings
263
841
1,210
615
0
Total Interest Expense
1,710
2,691
3,280
2,669
2,215
Net Interest Income
1,687
1,932
2,836
3,726
5,675
139
20
(248)
(281)
(538)
Net Interest Inc. After Loan Loss Prov.
1,826
1,952
2,588
3,445
5,137
Non-Interest Income, Bank
1,015
1,414
2,055
1,638
1,718
Loan Loss Provision
Non-Interest Expense, Bank
(834)
(841)
(973)
(892)
(1,138)
Net Income Before Taxes
2,006
2,525
3,671
4,191
5,718
Provision for Income Taxes
Net Income After Taxes
Minority Interest
Net Income Before Extra. Items
Discontinued Operations
Net Income
9
19
20
17
16
1,998
2,506
3,651
4,174
5,702
0
1
0
13
2
1,998
2,508
3,651
4,188
5,704
0
0
2
14
0
1,998
2,508
3,653
4,202
5,704
Source: Reuters Knowledge
104
MENA Year Book - 2011
Exhibit 121: Balance Sheet (in QAR million)
Cash & Due from Banks
2006
2007
2008
2009
2010
15,262
32,251
33,314
40,061
58,599
Total Investment Securities
8,878
11,309
11,815
23,333
24,048
Other Earning Assets, Total
8,878
11,309
11,815
23,333
24,048
Total Gross Loans
0
0
0
95,156
106,100
Loan Loss Allowances
0
0
0
(871)
(1,404)
Net Loans
46,227
66,064
100,053
108,783
131,696
Property/Plant/Equipment, Total - Gross
1,043
1,168
1,116
1,153
1,423
Accumulated Depreciation, Total
(454)
(516)
(498)
(440)
(508)
589
652
618
713
915
Property/Plant/Equipment, Total - Net
Long Term Investments
33
2,704
4,597
4,444
4,648
675
1,381
1,576
1,995
3,476
Total Assets
71,663
114,361
151,974
179,329
223,382
Interest Bearing Deposits
51,931
74,181
94,973
108,773
140,087
0
9,210
8,987
8,809
14,321
Other Assets
Total Short Term Borrowings
Long Term Debt
1,177
9,928
19,721
20,794
12,160
Total Debt
1,177
19,138
28,708
29,603
26,481
Minority Interest
0
1
0
191
555
Other Liabilities
10,114
7,183
11,649
21,077
32,022
Total Liabilities
63,222
100,503
135,330
159,644
199,145
Common Stock
1,298
1,825
2,409
3,011
3,915
Retained Earnings (Accumulated Deficit)
7,143
12,033
14,234
16,674
20,323
Total Equity
8,441
13,858
16,643
19,685
24,237
71,663
114,361
151,974
179,329
223,382
2008
2009
2010
Total Liabilities & Shareholders' Equity
Source: Reuters Knowledge
Exhibit 122: Cash Flow Statement (in QAR million)
2006
2007
Cash from Operating Activities
7,099
17,813
3,022
6,755
13,629
Cash from Investing Activities
(2,421)
(3,507)
(4,508)
2,240
(779)
Cash from Financing Activities
(772)
1,653
1,725
(1,820)
4,200
Net Change in Cash
3,761
15,936
521
7,129
17,075
8,600
12,361
28,297
27,969
35,098
12,361
28,297
28,818
35,098
52,172
Net Cash - Beginning Balance
Net Cash - Ending Balance
Source: Reuters Knowledge
105
MENA Year Book - 2011
Rabigh Refining & Petrochemical Co
Key statistics
Shareholding
Sector: Petrochemicals
Price – 16 Feb 2011
SAR24.55
Market Cap (mn)
Sumitomo Chemical Company
37.50%
Saudi Arabian Oil Company
37.50%
Public
25.00%
SAR21,505.80
Price 52wk High/Low
SAR37.90/20.70
Ticker: Bloomberg/
Reuters
PETROR AB/2380.SE
Foreign ownership limit
Shares Outstanding
49.00%
876.00 mn
Exhibit 123: Share Price Chart – 1 year
40
35
30
25
20
Feb-10
Apr-10
Jul-10
Sep-10
Nov-10
Feb-11
Source: Zawya
Business Description
Saudi Arabia-based Rabigh Refining and Petrochemical Company (Petro Rabigh) is engaged in the
development, construction and operation of an integrated petroleum refining and petrochemical
complex, including the manufacturing of refined petroleum products, petrochemical products and
other hydrocarbon products.
Petro Rabigh comprises 23 plants producing 18.4 million tons per annum (mtpa) of petroleumbased products and 2.4 mtpa of ethylene and propylene-based derivatives. Petro Rabigh was
formed through an equally owned joint venture between Saudi Aramco and Japan’s Sumitomo
Chemical. The ownership of both parties stands reduced to 37.5% each, after Petro Rabigh held its
initial public offering in 2008. Petro Rabigh employs over 2,000 people, 80% of which are Saudi
nationals.
Financial performance
Petro Rabigh’s revenues rose 59.2% to SAR46,837.9 million in 2010 compared to previous year.
The company benefitted from higher sales volume (newly commenced units) and better pricing
environment in 2010. Its gross profit was SAR728.7 million compared to a loss of SAR455.4 million
in 2009. The gross profit could have been higher but was affected by unplanned outages of some
plants in 3Q2010.
106
MENA Year Book - 2011
Petro Rabigh reported better numbers in 2010 than 2009 as it officially began operations only in
May 2009, thus resulting in plant availability just for seven months during 2009.
Comments/Outlook
Petro Rabigh is considering a major expansion through the “Rabigh II Project” and has already
commenced feasibility study for the same.
The company plans to achieve the following through the Rabigh II Project: Expanding the existing
ethane cracker for an additional 30 million standard cubic feet per day of feedstock ethane; building a new aromatics complex using around three million tons per year of naphtha; and constructing various units of petrochemical products having higher value and specialty such as EPR, TPO,
MMA, PMMA, LDPE/EVA, caprolactam, polyols, cumene, phenol/acetone, acrylic acid, SAP and
Nylon-6. The US$7.0 billion Rabigh II Project would add about 17 new products to the portfolio,
most of which would go beyond basic commodities and target the niche market.
Financials
Exhibit 124: Income Statement (in SAR million)
2006
Total Revenue
2007
2008
2009
2010
0
0
6,543
29,423
46,838
NM
NM
NM
349.7%
59.2%
Cost of Sales
0
0
7,165
29,878
46,109
Gross Profit
0
0
(622)
(455)
729
NM
NM
-9.5%
-1.5%
1.6%
260
423
680
754
841
0
0
0
0
0
% Change
Margin %
Selling/General/administration expenses
total
Depreciation/Amortization
Other Operating Expenses, Total
Operating Income
Margin %
Interest Inc.(Exp.),Net-Non-Op., Total
Other, Net
Net Income Before Taxes
Provision for Income Taxes
Net Income After Taxes
Net Margin %
Minority Interest
0
0
0
0
0
(260)
(423)
(1,302)
(1,209)
(113)
NM
NM
NM
NM
NM
85
(20)
45
127
175
0
0
0
(351)
146
(175)
(443)
(1,256)
(1,433)
209
0
0
0
0
0
(175)
(443)
(1,256)
(1,433)
209
NM
NM
NM
NM
0.4%
0
0
0
0
0
Net Income
(175)
(443)
(1,256)
(1,433)
209
EPS
(0.20)
(0.51)
(1.46)
(1.64)
0.24
Source: Reuters Knowledge
107
MENA Year Book - 2011
Exhibit 125: Balance Sheet (in SAR million)
Cash and Short Term Investments
2006
2007
2008
2009
2010
2,080
186
1,534
1,306
2,548
Total Receivables, Net
0
0
2,348
4,682
6,452
Total Inventory
0
0
974
2,670
2,826
Other Current Assets, Total
919
511
199
289
385
Total Current Assets
2,999
697
5,056
8,948
12,212
Property/Plant/Equipment, Total - Gross
7,841
23,813
33,053
34,178
NA
0
0
(83)
(790)
NA
7,841
23,813
32,970
33,388
31,480
0
0
0
298
292
331
2,451
3,338
3,212
9
0
0
6,548
6,301
3,250
Accumulated Depreciation, Total
Property/Plant/Equipment, Total - Net
Intangibles, Net
Long Term Investments
Other Long Term Assets, Total
Total Assets
11,171
26,961
47,911
52,146
47,243
Accounts Payable
564
915
6,647
9,455
11,510
Accrued Expenses
122
445
421
848
768
Notes Payable/Short Term Debt
0
0
0
895
0
Current Port. of LT Debt/Capital Leases
0
0
131
140
1,287
Other Current liabilities, Total
1,266
204
0
0
74
Total Current Liabilities
1,952
1,564
7,199
11,338
13,639
Long Term Debt
6,769
19,444
24,900
26,475
25,197
0
0
6,539
6,486
368
Capital Lease Obligations
Other Liabilities, Total
0
0
9
17
29
Total Liabilities
8,721
21,008
38,647
44,316
39,233
Common Stock, Total
2,625
6,570
8,760
8,760
8,760
Retained Earnings (Accumulated Deficit)
(175)
(617)
535
(898)
(719)
Other Equity, Total
Total Equity
Total Liabilities & Shareholders' Equity
0
0
(32)
(31)
(31)
2,450
5,953
9,264
7,831
8,010
11,171
26,961
47,911
52,146
47,243
2008
2009
2010
Source: Reuters Knowledge
Exhibit 126: Cash Flow Statement (in SAR million)
2006
Cash from Operating Activities
2007
(407)
(423)
1,520
(1,465)
2,085
Cash from Investing Activities
(8,172)
(18,092)
(10,127)
(1,101)
60
Cash from Financing Activities
10,659
16,620
9,956
2,337
(903)
2,080
(1,894)
1,348
(228)
1,242
0
2,080
186
1,534
1,306
2,080
186
1,534
1,306
2,549
Net Change in Cash
Net Cash - Beginning Balance
Net Cash - Ending Balance
Source: Reuters Knowledge
108
MENA Year Book - 2011
Riyad Bank
Key statistics
Shareholding
Sector: Banking
Price – 16 Feb 2011
SAR25.90
Market Cap (mn)
SAR38,850.00
Price 52wk High/Low
SAR31.20/25.00
Ticker: Bloomberg/
Reuters
RIBL:AB/1010.SE
Public
31.80%
Public Investment Fund
General Organization for
Social Insurance
21.70%
Foreign ownership limit
Shares Outstanding
21.60%
49.00%
1,500.00 mn
Exhibit 127: Share Price Chart – 1 year
32.5
30.0
27.5
25.0
22.5
Feb-10
Apr-10
Jul-10
Sep-10
Nov-10
Feb-11
Source: Zawya
Business Description
Riyad Bank is the largest bank in Saudi Arabia with around 12% market share by total assets. It
provides banking and investment services in accordance to the Islamic Sharia principles.
Riyad Bank offers its services through four divisions: Retail Banking accounted for 28.3% of the
total operating income for the first nine months of 2010, Investment and Brokerage segment
(3.8%), Corporate Banking (40.5%), and Treasury & Investment Banking (14.0%). The Retail Banking division covers deposit, credit and investment products for individuals and small to medium
sized businesses. Investment banking and Brokerage segment covers investment management
services and asset management activities related to dealing, managing, arranging, advising and
custody of securities. The Corporate Banking division includes direct debit solutions, cash management, scheduled transfers, trade finance solutions and credit solutions. The Treasury division offers foreign exchange, deposits and hedging instruments, Saudi Government bonds, as well as
investment services.
Riyad Bank operates through a network of 216 branches across Saudi Arabia. It also has a branch
at London, an agency in Huston, US, and a representative office in Singapore.
109
MENA Year Book - 2011
Financial performance
For the nine months ended September 30, 2010, Riyad Bank's special commission income decreased 19.4% to SAR3.6 billion. However, operating income rose by 2.5% due to higher fee and
commission income from Retail Banking, Brokerage, Treasury and Investment segments. Favorable
currency impact and gain on non-trading investments also contributed to the rise in operating
income. Net income decreased 2.7% to SAR2.1 billion due to lower special commission income and
higher impairment charges and loss.
Comments/Outlook
For the nine months ended September 30, 2010, the loan loss provisions as a percentage of net
loans increased from 0.41% in 2009 to 0.74% in 2010.
Riyad Bank was awarded the highest ratings by Standard & Poors, an international credit rating
agency, in 2009. The bank has been awarded A+ and A-1 ratings for long term and short term liabilities, respectively. These were the highest credit ratings among banks in the Kingdom. Fitch
awarded the bank an A+ rating for long term liabilities and an F1 for short term liabilities. Additionally, Riyad Bank has been awarded an AA- for long term liabilities and an A+ for short term liabilities by Capital Intelligence.
Financials
Exhibit 128: Income Statement (in SAR million)
2006
2007
2008
2009
9M2010
3,641
Interest Income, Bank
5,509
6,210
6,737
5,814
Total Interest Expense
(2,582)
(2,943)
(2,790)
(1,467)
(541)
2,926
3,266
3,947
4,347
3,100
Net Interest Income
Loan Loss Provision
(372)
(346)
(349)
(619)
(775)
Net Interest Inc. After Loan Loss Prov.
2,554
2,921
3,598
3,729
2,325
Fees & Commissions from Operations
1,317
1,011
1,187
1,223
1,070
358
480
(283)
(6)
(5)
Dealer Trading Account Profit
Investment Securities Gains
Foreign Currency Gains
Other Revenue
Non-Interest Income, Bank
19
102
53
(19)
109
142
272
264
166
174
124
38
80
249
47
1,960
1,902
1,301
1,613
1,395
Labor & Related Expenses
(875)
(960)
(1,053)
(1,118)
(860)
Depreciation Expense
(150)
(195)
(231)
(262)
(201)
Other Unusual Expense
-
-
(174)
(118)
85
Other Expense
(580)
(656)
(803)
(813)
(683)
Net Income Before Taxes
2,909
3,011
2,639
3,030
2,061
99%
92%
67%
70%
66%
0
0
0
0
0
2,909
3,011
2,639
3,030
2,061
99%
92%
67%
70%
66%
2.4
2.5
1.8
2.0
1.4
% Margin
Provision for Income Taxes
Net Income After Taxes
% Margin
EPS
Source: Reuters Knowledge
110
MENA Year Book - 2011
Exhibit 129: Balance Sheet (in SAR million)
Cash & Due from Banks
2006
2007
2008
2009
9M2010
10,887
20,747
17,335
32,124
28,461
Total Investment Securities
27,502
27,742
40,329
32,308
31,667
Loan Loss Allowances
(1,477)
(1,525)
(1,072)
0
0
Net Loans
52,183
67,340
96,430
106,515
105,042
2,371
2,863
3,237
3,694
0
(1,202)
(1,390)
(1,607)
(1,864)
0
1,169
1,472
1,630
1,830
1,814
Property/Plant/Equipment, Total - Gross
Accumulated Depreciation, Total
Property/Plant/Equipment, Total - Net
Other Real Estate Owned
485
493
514
407
397
Other Assets
1,790
3,556
3,415
3,216
4,335
Total Assets
94,016
121,351
159,653
176,399
171,717
550
1,157
0
0
0
69,192
84,331
105,056
125,278
124,236
8,167
17,798
21,213
16,163
12,416
275
593
0
0
0
Accounts Payable
Interest Bearing Deposits
Other Deposits
Other Bearing Liabilities
Long Term Debt
1,871
1,872
1,874
1,873
1,874
Other Liabilities
1,969
2,412
5,819
4,849
4,727
Total Liabilities
82,024
108,164
133,962
148,164
143,253
Common Stock
6,250
6,250
15,000
15,000
15,000
Retained Earnings (Accumulated Deficit)
5,742
6,937
10,690
13,235
13,464
Total Liabilities & Shareholders' Equity
94,016
121,351
159,653
176,399
171,717
Source: Reuters Knowledge
Exhibit 130: Cash Flow Statement (in SAR million)
2006
2007
2008
2009
9M2010
Cash from Operating Activities
4,325
11,445
(2,593)
5,466
(66)
Cash from Investing Activities
(497)
(281)
(14,058)
9,317
920
Cash from Financing Activities
69
(1,988)
10,925
(2,015)
(2,058)
Net Change in Cash
3,897
9,177
(5,726)
12,769
(1,204)
Net Cash - Beginning Balance
2,328
6,225
15,402
9,676
22,445
Net Cash - Ending Balance
6,225
15,402
9,676
22,445
21,241
Source: Reuters Knowledge
111
MENA Year Book - 2011
Saudi Basic Industries Corp. (SABIC)
Key statistics
Shareholding
Sector: Petrochemicals
Price – 16 Feb 2011
SAR101.25
Market Cap (mn)
SAR303,750.00
Price 52wk High/Low
SAR112.25/76.25
Ticker: Bloomberg/
Reuters
SABIC:AB/2010.SE
Public Investment Fund
70.00%
Public
General Organization for
Social Insurance
24.90%
Foreign ownership limit
Shares Outstanding
5.10%
49.00%
3,000.00 mn
Exhibit 131: Share Price Chart – 1 year
120
110
100
90
80
70
Feb-10
Apr-10
Jul-10
Sep-10
Nov-10
Feb-11
Source: Zawya
Business Description
Established in 1976 by the Government of Saudi Arabia, SABIC is the world’s sixth largest petrochemical company. It is the largest petrochemical company in the Middle East. The company is
primarily engaged in the production of basic, intermediate and industrial chemicals and plastics.
SABIC operates through four business units – Chemicals contributing 83.8% to the 2010 gross revenues before consolidated adjustments and eliminations, Fertilizers (3.4%), Metals (6.7%), and Corporate (6.1%). Chemicals segment includes olefins, oxygenates, aromatics, chemical intermediates,
fiber intermediates, industrial gases and linear alpha olefins. Fertilizers products include urea,
ammonia, phosphate, and sulfuric acid. Metals products comprise flat and long steel products.
SABIC has wide geographic presence in Saudi Arabia, with Al-Jubail and Dammam on the Arabian
Gulf and Yanbu on the Red Sea. The company also operates in other international regions, including the Middle East, Africa, Asia, the Americas and Europe. SABIC’s manufacturing and compounding complexes are spread across the world – 24 in the Middle East, 11 in Asia, 12 in Europe and 17
in the Americas.
Financial performance
SABIC’s revenues rose 47.2% YoY to SR21.59 billion in 2010 due to growth across segments, particularly Chemicals, which grew 49.9% YoY to SR167.8 billion on higher volumes and prices.
112
MENA Year Book - 2011
Revenues from Corporate segment increased 100.1% to SR12.3 billion due to higher volumes and
improved plastics prices. SABIC’s net income jumped 2.4x YoY to SR21.59 billion in 2010 owing to
improved operating performance and absence of loss on impairment of goodwill (SR1.8 billion in
2009).
Comments/Outlook
SABIC plans to further diversify its product portfolio. It has taken some strategic initiatives to boost
its performance chemicals business. For instance, in April 2010, SABIC signed an agreement with
the Celanese Corporation for the construction of a 50,000 ton polyacetal (POM) production facility
at the SABIC affiliate National Methanol (IBN SINA) complex in Jubail Industrial City, Saudi Arabia.
The engineering and construction of the facility is expected to begin by 2011 and would be operational by 2013; it would use methanol produced by IBN SINA. The new facility can boost SABIC's
position in the performance chemicals industry. In August 2010, SABIC signed an agreement with
Lurgi, a German firm, for technology licensing and engineering. The agreement would allow SABIC
to produce oleo-chemicals at Saudi Kayan Petrochemical Company, its affiliate company, following
the completion of new facilities in Jubail, Saudi Arabia. The new production line is expected to be
operational by the end of 2013. SABIC's diversification into oleo-chemical products would increase
its performance chemicals portfolio. The capacity additions in 2010 included the setting up of
Yansab plant encompassing a production capacity of 4.0 mtpa of petrochemical products and the
Sinopec-SABIC joint venture petrochemical complex at Tianjin (China), having a production capacity of 3.2 mtpa. The total capacity of SABIC for petrochemical and other chemical products currently stands at 69.7 mtpa. With SABIC-Celanese and SABIC-MRC joint ventures commencing operations of their petrochemical plants, the capacity is expected to reach 70.03 mtpa by 2013.
SABIC believes the aggressive expansion strategy would help to increase its total production capacity to 130.0 mtpa by 2020.
Financials
Exhibit 132: Income Statement (in SAR million)
Total Revenue
% Change
2006
2007
2008
2009
2010
86,328
126,204
150,810
103,062
151,711
0.0%
46.2%
19.5%
-31.7%
47.2%
Cost of Sales
51,100
78,254
105,046
74,442
103,168
Gross Profit
35,228
47,950
45,763
28,620
48,542
0.0%
0
36.1%
0
-4.6%
4,094
-37.5%
3,558
69.6%
0
4,342
6,904
8,482
8,004
10,710
0
0
690
1,812
0
Operating Income
30,886
41,047
36,591
18,804
37,832
Investment Income
2,552
4,230
4,545
1,496
1,360
Finance Charges
(1,567)
(2,869)
(3,801)
(3,026)
(3,382)
Net Income Before Taxes
31,871
42,408
37,335
17,275
35,810
Margin %
Staff Costs
Selling & General expenses
Other Operating expenses
Provision for Income Taxes
1,050
1,800
1,400
900
2,500
30,821
40,608
35,935
16,375
33,310
Net Margin %
0.0%
31.8%
-11.5%
-54.4%
103.4%
EPS
6.76
9.01
7.34
3.79
7.59
Net Income After Taxes
Source: Reuters Knowledge
113
MENA Year Book - 2011
Exhibit 133: Balance Sheet (in SAR million)
Cash and Short Term Investments
2006
2007
2008
2009
2010
39,557
45,877
51,028
56,377
50,645
Total Receivables, Net
19,917
29,598
19,268
25,534
39,551
Total Inventory
14,097
22,831
25,160
24,552
26,240
Prepaid Expenses
Total Current Assets
404
0
0
0
0
73,974
98,305
95,455
106,464
116,436
Property/Plant/Equipment, Total - Gross
142,881
192,239
219,736
243,422
0
Accumulated Depreciation, Total
(62,911)
(69,126)
(78,296)
(85,882)
0
79,971
123,114
141,440
157,539
165,050
0
0
14,972
14,061
0
Intangibles, Net
5,094
22,964
8,007
7,840
22,263
Long Term Investments
3,532
6,021
8,793
8,299
8,829
Property/Plant/Equipment, Total - Net
Goodwill, Net
Other Long Term Assets, Total
4,018
3,327
3,093
2,659
4,636
166,589
253,731
271,760
296,861
317,214
Accounts Payable
11,065
14,965
8,261
13,383
15,347
Accrued Expenses
7,748
12,279
11,864
12,268
10,826
608
1,399
1,236
940
1,121
5,521
3,272
3,053
5,537
15,501
0
0
0
0
625
1,767
2,166
1,721
1,978
Long Term Debt
33,612
75,438
88,368
100,538
94,031
Minority Interest
27,607
43,342
43,709
44,375
45,342
7,545
10,115
10,171
9,845
11,605
Total Liabilities
93,706
162,577
168,828
188,607
196,375
Common Stock, Total
25,000
25,000
30,000
30,000
30,000
Total Assets
Notes Payable/Short Term Debt
Current Port. of LT Debt/Capital Leases
Dividends Payable
Income Taxes Payable
Other Liabilities, Total
Retained Earnings (Accumulated Deficit)
47,883
66,154
72,933
78,255
90,839
Total Equity
72,883
91,154
102,933
108,255
120,839
166,589
253,731
271,760
296,861
317,214
Total Liabilities & Shareholders' Equity
Source: Reuters Knowledge
Exhibit 134: Cash Flow Statement (in SAR million)
2006
2007
2008
2009
2010
Cash from Operating Activities
34,735
46,655
46,230
26,012
30,489
Cash from Investing Activities
(17,867)
(73,704)
(29,807)
(24,636)
(20,139)
Cash from Financing Activities
(5,484)
33,521
(11,272)
3,973
(16,083)
Net Change in Cash
11,384
6,472
5,151
5,350
(5,732)
Net Cash - Beginning Balance
28,173
39,405
45,877
51,028
56,377
Net Cash - Ending Balance
39,557
45,877
51,028
56,377
50,645
Source: Reuters Knowledge
114
MENA Year Book - 2011
Saudi Arabian Fertilizers Co
Key statistics
Shareholding
Sector: Petrochemicals
Price – 16 Feb 2011
SAR185.50
Market Cap (mn)
SAR46,375.00
Price 52wk High/Low
SAR187.00/116.75
Ticker: Bloomberg/
Reuters
SAFCO AB/2020.SE
Saudi Basic Industries Corporation
Public
General Organization for
Social Insurance
Foreign ownership limit
Shares Outstanding
42.99%
39.68%
16.70%
49.00%
250.00 mn
Exhibit 135: Share Price Chart – 1 year
200
180
160
140
120
100
Feb-10
Apr-10
Jul-10
Sep-10
Nov-10
Feb-11
Source: Zawya
Business Description
Saudi Arabian Fertilizer Company (SAFCO), established in 1965, is engaged in the production, processing and marketing of chemicals such as ammonia, urea, melamine and sulfuric acid. The company’s products are sold in local as well as international markets. SAFCO’s ammonia and urea
plants in Dammam produce 2.1 million tons of ammonia and 2.3 million tons of urea annually. Its
last major expansion, SAFCO IV, was carried out in 2007 and added 1.1 million tons per annum
(mtpa) of ammonia and 1.1 mtpa of urea capacity. SAFCO is an affiliate of Saudi Arabian Basic Industries (SABIC), which owns a 42.9% stake in the company.
Financial performance
SAFCO’s revenue grew to SAR3,789.5 million in 2010 compared to SAR2,741.7 million in 2009,
owing to higher price realization and increase in sales volumes driven by pickup in demand for
fertilizer products across the globe. In 2010, SAFCO’s gross profit margins improved by 860 basis
points to 71.0% due to higher capacity utilization and effective cost control measures. SAFCO procures its feedstock, natural gas, from Saudi Aramco at a fixed cost of US$0.75/mmbtu.
As a result, SAFCO posted a net profit of SAR3,234.6 million, up 79.3% over the last year. Furthermore, the company also benefited from a non-operational income of SAR302.5 million in 2010.
115
MENA Year Book - 2011
Earnings per share were SR12.94 in 2010 compared to SAR7.22 in the previous year.
Comments/Outlook
SAFCO has not expanded its production capacity since 2007. It was pursuing two new projects,
SAFCO V and HADEED JV, to expand its current urea and ammonia production capacities as well as
diversify into the steel business. However, these projects were facing delays for quite some time.
In January 2011, SAFCO announced that it has decided to opt out of the planned JV with HADEED
for the construction of a flat steel plant in Jubail Industrial City, and instead would carry out feasibility studies for the construction of a new plant, SAFCO V, for the production of urea.
SAFCO V would have a design capacity to produce 1.2 million tons of ammonia and 1.5 million tons
of urea.
Financials
Exhibit 136: Income Statement (in SAR million)
2006
2007
2008
2009
2010
Total Revenue
1,831
3,105
5,236
2,741
3,789
% Change
0.4%
69.5%
68.6%
-47.7%
38.3%
741
816
895
1,031
1,100
Cost of Sales
Gross Profit
1,090
2,289
4,341
1,710
2,690
Margin %
59.5%
73.7%
82.9%
62.4%
71.0%
73
108
15
12
68
Selling & General expenses
Research & Development
Operating Income
Margin %
Interest Income (Expense)
Other, Net
Net Income Before Taxes
Provision for Income Taxes
28
45
76
40
0
988
2,136
4,250
1,658
2,622
54.0%
68.8%
81.2%
60.5%
69.2%
209
193
465
179
307
(19)
(33)
(75)
(8)
65
1,178
2,296
4,640
1,829
2,993
27
77
109
96
61
Net Income After Taxes
1,151
2,219
4,530
1,733
2,932
Net Margin %
62.9%
71.5%
86.5%
63.2%
77.4%
Total Extraordinary Items
Net Income
EPS
0
(10)
(251)
71
303
1,151
2,209
4,280
1,804
3,235
4.61
8.84
17.12
7.22
12.94
Source: Reuters Knowledge
116
MENA Year Book - 2011
Exhibit 137: Balance Sheet (in SAR million)
Cash and Short Term Investments
2006
2007
2008
2009
2010
594
1,573
3,925
2,965
2,256
Total Receivables, Net
675
837
765
780
890
Total Inventory
268
323
321
312
345
19
29
128
0
127
0
48
22
19
18
Prepaid Expenses
Other Current Assets, Total
Total Current Assets
1,555
2,810
5,161
4,075
3,637
Property/Plant/Equipment, Gross
6,060
6,222
6,113
5,734
NA
(2,171)
(2,410)
(2,655)
(2,282)
NA
3,889
3,812
3,458
3,452
3,243
Accumulated Depreciation
Property/Plant/Equipment- Net
Intangibles, Net
Long Term Investments
Other Long Term Assets
Total Assets
Accounts Payable
63
0
0
0
0
908
633
235
380
1,269
313
828
997
901
229
6,729
8,083
9,850
8,808
8,379
208
542
322
654
437
Accrued Expenses
133
0
0
0
0
Current Port. of LT Debt/Capital Leases
177
148
237
237
193
Other Current liabilities
71
119
180
138
0
Total Current Liabilities
589
809
739
1,030
630
Long Term Debt
1,063
826
590
353
160
Other Liabilities
337
433
488
411
455
Total Liabilities
1,989
2,068
1,816
1,793
1,245
Common Stock
2,000
2,000
2,500
2,500
2,500
Retained Earnings (Accumulated Deficit)
2,739
4,014
5,534
4,515
4,634
Total Equity
4,739
6,014
8,034
7,015
7,134
Total Liabilities & Shareholders' Equity
6,729
8,083
9,850
8,808
8,379
Source: Reuters Knowledge
Exhibit 138: Cash Flow Statement (in SAR million)
Cash from Operating Activities
2006
2007
2008
2009
2010
1,005
2,415
4,231
2,231
2,304
Cash from Investing Activities
138
29
162
52
474
Cash from Financing Activities
(853)
(1,465)
(2,048)
(3,237)
(3,487)
0
0
0
0
0
Net Cash - Beginning Balance
290
979
2,345
(954)
(709)
Net Cash - Ending Balance
304
594
1,573
3,918
2,965
Net Change in Cash
Source: Reuters Knowledge
117
MENA Year Book - 2011
Samba Financial Group
Key statistics
Shareholding
Sector: Banking
Price – 16 Feb 2011
Market Cap (mn)
Price 52wk High/Low
Public
50.70%
SAR56.75
Public Investment Fund
22.90%
SAR51,075.00
Public Pension Agency
15.00%
SAR64.75/51.00
Ticker: Bloomberg/
Reuters
SAMBA:AB/1090.SE
Foreign ownership limit
49.00%
Shares Outstanding
900.00mn
Exhibit 139: Share Price Chart – 1 year
70
65
60
55
50
45
Feb-10
Apr-10
Jul-10
Sep-10
Nov-10
Feb-11
Source: Zawya
Business Description
Established in February 1980, Samba Financial Group (Samba) is one of the leading banking and
financial services company in Saudi Arabia. Samba offers its services through four business segments: Individual, which accounted for 32.8% of the net income for nine months ended September 2010, Corporate (36.2%), Treasury (25.5%) and Investment banking (5.5%).
Through consumer segment, the company provides customer deposit products, credit cards, retail
investment products and consumer loans. Additionally, it provides international and domestic
shares brokerage services and fiduciary funds management services. Corporate segment offers a
wide range of banking products such as corporate time deposits, call and current accounts, overdrafts, loans and other credit facilities to corporate customers. It also provides cash management
services, investment services, trading and derivative services. Treasury segment deals with services related to money market, commission rate trading, foreign exchange and derivatives for
institutional, corporate customers. Samba’s Investment banking segment is involved in asset management activities in relation with dealing, managing, arranging, and advising businesses on investments.
Samba operates through a network of 65 branches across Saudi Arabia, a branch in Dubai, and in
London. It also operates in Pakistan through Crescent Commercial Bank, its subsidiary.
118
MENA Year Book - 2011
Financial performance
For the nine months ended September 30, 2010, Samba’s total income decreased 20.1% to SAR4.0
billion due to decline in special commission income. Net special commission income fell 12.0% to
SAR3.1 billion, partly offset by lower special commission expenses and loan loss provisions.
Net income decreased 4.9% to SAR3.5 billion due to lower commission income and trading and
foreign exchange income offsetting income from financial instruments (against a loss of SAR14.7
million last year), higher investments income and other commission income and lower staff expense.
Comments/Outlook
In April 2010, Samba signed a collaboration agreement with Sejel, which operates and develops
the Hajj and Umrah Information Centre, to develop new Umrah automated payment solution for
collecting payments relating to Umrah packages. Samba opened its first branch in Doha, Qatar, in
the same month. The new branch services include customer deposits, consultancy in the field of
investment, arrangement for investments deals, credit facilities, provision and custody of securities and investment management.
Loan loss ratio as a percentage of net loans increased marginally from 0.44% in September 2009 to
0.46% in September 2010. Samba has been assigned a stable outlook by Capital Intelligence, an
international credit rating agency. Capital Intelligence upgraded Samba’s rating from A+ to AAbased on the credit profile and financial strength.
Financials
Exhibit 140: Income Statement (in SAR million)
2006
2007
2008
2009
9M2010
Interest Income, Bank
8,386
8,426
8,426
6,351
3,963
Total Interest Expense
3,442
3,365
3,365
1,282
481
Net Interest Income
4,944
5,061
5,061
5,070
3,482
Loan Loss Provision
423
458
458
605
376
Net Interest Inc. After Loan Loss Prov.
4,522
4,603
4,603
4,465
3,106
Non-Interest Income
2,252
1,951
1,951
2,040
1,860
(1,289)
(1,366)
(1,366)
(1,266)
(909)
(123)
(137)
(137)
(143)
(102)
Labor & Related Expenses
Depreciation Expense
Real Estate Operation Expense
(181)
(199)
(199)
(222)
(168)
Other Expense
(373)
(409)
(409)
(320)
(256)
(1,966)
(2,111)
(2,111)
(1,951)
(1,435)
4,808
4,443
4,443
4,553
3,532
Non-Interest Expense
Net Income Before Taxes
Provision for Income Taxes
Net Income After Taxes
Minority Interest
Net Income
EPS
0
0
0
0
0
4,808
4,443
4,443
4,553
3,532
21
11
11
7
2
4,828
4,454
4,454
4,560
3,534
5.36
4.95
4.95
5.07
3.94
Source: Reuters Knowledge
119
MENA Year Book - 2011
Exhibit 141: Balance Sheet (in SAR million)
Cash & Due from Banks
Interest-earning Deposits
2006
2007
2008
2009
9M2010
11,098
13,800
13,800
35,847
27,672
2,312
878
878
3,499
3,003
53,574
54,213
54,213
54,967
64,350
Total Gross Loans
83,553
101,220
101,220
87,522
0
Loan Loss Allowances
(2,999)
(3,073)
(3,073)
(3,376)
0
Net Loans
80,553
98,147
98,147
84,147
81,316
2,092
2,246
2,246
2,408
0
(1,259)
(1,376)
(1,376)
(1,512)
0
833
870
870
896
927
Other Short Term Investments
Property/Plant/Equipment, Total - Gross
Accumulated Depreciation, Total
Property/Plant/Equipment, Total - Net
Long Term Investments
11
6
6
9
8
Other Assets
6,033
10,977
10,977
6,154
7,738
Total Assets
154,414
178,891
178,891
185,518
185,014
Accounts Payable
0
833
833
747
0
Non-Interest Bearing Deposits
0
43,590
43,590
57,207
0
Interest Bearing Deposits
Other Deposits
Other Bearing Liabilities
Long Term Debt
Minority Interest
11,425
97,372
97,372
92,093
18,740
115,811
6,373
7,317
7,116
131,929
0
6,584
6,584
2,767
0
2,039
1,873
1,873
1,874
1,875
131
216
216
192
189
7,163
2,205
1,261
1,214
6,830
Total Liabilities
136,569
159,045
159,045
163,208
159,563
Common Stock
6,000
9,000
9,000
9,000
9,000
12,133
11,354
11,279
14,020
17,612
0
(75)
0
0
0
Other Liabilities
Retained Earnings (Accumulated Deficit)
Translation Adjustment
Other Equity
(288)
(433)
(433)
(710)
(1,160)
Total Equity
17,845
19,846
19,846
22,310
25,452
154,414
178,891
178,891
185,518
185,014
2009
9M2010
Total Liabilities & Shareholders' Equity
Source: Reuters Knowledge
Exhibit 142: Cash Flow Statement (in SAR million)
2006
2007
2008
Cash from Operating Activities
16,493
4,112
4,758
24,193
1,762
Cash from Investing Activities
(16,149)
(1,236)
(1,882)
(1,056)
(7,509)
Cash from Financing Activities
(4,335)
(1,609)
(1,609)
(1,657)
(2,084)
Net Change in Cash
0
0
0
0
0
Net Cash - Beginning Balance
(3,991)
1,267
1,267
21,479
(7,831)
Net Cash - Ending Balance
10,756
6,765
6,765
8,032
29,511
Source: Reuters Knowledge
120
MENA Year Book - 2011
Saudi Arabian Mining Co (Ma'aden)
Key statistics
Shareholding
Sector: Mining
Price – 16 Feb 2011
SAR24.00
Market Cap (mn)
SAR22,200.00
Price 52wk High/Low
SAR24.70/15.80
Ticker: Bloomberg/
Reuters
MAADEN AB/1211.SE
Public Investment Fund
50.00%
Public
35.60%
General Organization for
Social Insurance
Foreign ownership limit
Shares Outstanding
8.40%
49.00%
925.00 mn
Exhibit 143: Share Price Chart – 1 year
26
24
22
20
18
16
14
Feb-10
Apr-10
Jul-10
Sep-10
Nov-10
Feb-11
Source: Zawya
Business Description
Saudi Arabian Mining Co (Ma'aden) was formed in March 1997 for developing Saudi Arabia’s mineral resources. For most part of its history, Ma'aden has been engaged in mining of gold and some
base metals. It operates five gold mines in the KSA, namely Mahd Ad Dahab, Al Hajar, Sukhaybarat,
Bulghah and Al Amar. In line with its bid to become a world-class international mineral resource
company, Ma’aden is now expanding activities beyond mining of gold and base metals to phosphate, bauxite, magnesite, caustic soda and others. Ma'aden has tied up with SABIC for a Phosphate Project and with Alcoa for an Aluminium Project. It also plans to produce caustic soda in
joint venture (JV) with Sahara Petrochemical Company.
Financial performance
Ma'aden reported sales of SAR706.5 million in 2010, up 11.4% YoY. The company benefitted from
higher gold prices, as gross profit margins expanded by a little more than 400 basis points to 55.8%
in 2010 from 51.7% in 2009. Data from the World Gold Council suggests that gold prices rose 29%
in 2010 to US$1,406 per oz by December-end on the London PM fx.
Despite generating a higher gross profit, Ma'aden ended 2010 with a net loss of SAR12.8 million
compared to a net profit of SAR394.8 million in 2009, owing to higher selling, general & administrative (SG&A) expenses and higher tax (Zakat) provisions.
121
MENA Year Book - 2011
SG&A expenses jumped 38.5% in 2010 to SAR217.4 million from SAR156.9 million a year earlier.
The company stated that Zakat provision for 2010 was re-calculated and hence, resulted in a huge
loss in 4Q2010 and effectively the entire 2010.
Comments/Outlook
The Phosphate Project, which is being developed as a 70:30 JV with SABIC, is set to be operational
soon (3Q2011). Commencement of the USD5.5 billion plant is expected to boost the earnings of
Ma'aden.
The Phosphate Project comprises two sub-projects. The first, at the Al-Jalamid mine in the north of
KSA, would comprise a phosphate mine and a beneficiation plant. The second, at the Ras az-Zawr
site about 90 km north of Al-Jubail, would have a fertilizer production facility comprising diammonium phosphate (DAP), ammonia, sulphuric acid and phosphoric acid processing plants.
Once complete, the Phosphate Project would produce an estimated 2.92 million tonnes per year
(MTPA) of granular DAP, in addition to approximately 0.44 MTPA of excess ammonia for exporting
to the world markets.
Financials
Exhibit 144: Income Statement (in SAR million)
2006
Total Revenue
2007
2008
2009
2010
350
244
460
634
707
25.8%
-30.2%
88.5%
37.9%
11.4%
Cost of Sales
188
167
239
306
312
Gross Profit
162
77
221
328
394
46.3%
56
31.4%
94
48.0%
219
51.7%
157
55.8%
217
% Change
Margin %
Selling & General expenses
Depreciation/Amortization
Other Operating Expenses, Total
Operating Income
Margin %
Interest Income (Expenses)
Other, Net
Net Income Before Taxes
Provision for Income Taxes
Net Income After Taxes
Net Margin %
Minority Interest
3
2
3
3
73
59
35
87
124
69
44
(54)
(88)
44
35
12.7%
-22.2%
-19.0%
7.0%
4.9%
274
226
290
314
168
0
28
(1)
300
(14)
318
199
202
659
189
0
0
0
269
207
318
199
202
390
(18)
90.9%
81.6%
43.8%
61.5%
NM
0
0
2
5
5
Net Income
318
199
203
395
(13)
EPS
0.34
(0.27)
0.22
0.43
(0.01)
Source: Reuters Knowledge
122
MENA Year Book - 2011
Exhibit 145: Balance Sheet (in SAR million)
Cash and Short Term Investments
2006
2007
2008
2009
2010
4,874
2,755
11,428
11,541
9,317
Total Receivables, Net
11
269
82
93
91
Total Inventory
99
111
167
206
332
Other Current Assets, Total
Total Current Assets
Property/Plant/Equipment, Total - Gross
Accumulated Depreciation, Total
Property/Plant/Equipment, Total - Net
Long Term Investments
7
82
753
292
2,750
4,990
3,217
12,430
12,131
12,489
720
777
7,552
14,727
20,980
(410)
(435)
(499)
(584)
(661)
310
341
7,053
14,144
20,319
0
1,816
0
0
0
Note Receivable - Long Term
64
0
66
19
86
Other Long Term Assets, Total
674
474
1,810
2,936
2,016
34,910
Total Assets
6,038
5,848
21,358
29,230
Accounts Payable
83
147
2,429
623
692
Accrued Expenses
110
106
1,144
969
1,517
Other Current liabilities, Total
Total Current Liabilities
0
0
0
314
285
193
253
3,573
1,906
2,494
Long Term Debt
0
0
820
8,783
13,517
Minority Interest
0
0
639
1,782
2,134
Other Liabilities, Total
114
112
139
176
196
Total Liabilities
306
364
5,171
12,647
18,341
4,000
4,000
9,250
9,250
9,250
0
0
5,250
5,250
5,250
1,548
1,301
1,484
1,839
1,827
183
183
204
243
243
Common Stock, Total
Additional Paid-In Capital
Retained Earnings (Accumulated Deficit)
Treasury Stock - Common
Total Equity
5,731
5,484
16,188
16,582
16,570
Total Liabilities & Shareholders' Equity
6,038
5,848
21,358
29,230
34,910
2009
2010
Source: Reuters Knowledge
Exhibit 146: Cash Flow Statement (in SAR million)
2006
2007
2008
Cash from Operating Activities
159
(645)
3,026
138
307
Cash from Investing Activities
(94)
1,058
(11,249)
(8,874)
(5,609)
Cash from Financing Activities
0
0
11,183
7,963
5,091
65
413
2,961
(774)
(210)
Net Cash - Beginning Balance
4,682
183
596
4,145
3,371
Net Cash - Ending Balance
4,747
596
3,556
3,371
3,161
Net Change in Cash
Source: Reuters Knowledge
123
MENA Year Book - 2011
Saudi Electricity Company
Key statistics
Shareholding
Sector: Electric Utilities
Price – 16 Feb 2011
SAR14.00
Market Cap (mn)
SAR58,332.26
Price 52wk High/Low
Ministry of Water and Electricity (Saudi Arabia)
Foreign ownership limit
Shares Outstanding
100.00%
49.00%
4,166.59
SAR15.60/10.50
Ticker: Bloomberg/
Reuters
SECO:AB/5110.SE
Exhibit 147: Share Price Chart – 1 year
16
15
13
12
10
Feb-10
Apr-10
Jul-10
Sep-10
Nov-10
Feb-11
Source: Zawya
Business Description
Saudi Electricity Company (SECO), a leading electric utility in Saudi Arabia, is primarily engaged in
the generation, transmission and distribution of electric power in the country. The company caters
to governmental, industrial, agricultural, commercial and residential consumers. It generates
power through its gas, steam, diesel and cogeneration units, which have annual combined generation capacity of 39,242 megawatts.
Power transmission activity is carried out through the company’s high-voltage transmission network, which comprises around 39,793 circuit km of underground and overhead cables and 170,400
circuit km of distribution lines. SECO transmits power to around 5,420,810 customers. The company’s Transmission Business Unit (TBU) owns and operates of the transmission system through
570 substations and 1653 power transformers, which have a combined capacity of well over
148,088 MVA. Established in 2000 in Riyadh, SECO employs around 28,315 people.
Financial performance
Total revenues increased 16.8% to SAR27.86 billion for the fiscal year ended December 31, 2010,
led by a growth in electricity sale due to higher reading and maintenance of meters as well as increased gains on electricity transmission. Operating income rose 2.3x to SAR1.8 billon on a fall in
total costs (as a percentage of revenue), primarily cost of production.
124
MENA Year Book - 2011
Net income grew 97.3% to SAR2.3 billion in 2010 from SAR1.1 billion in 2009 on account of a
32.7% increase in other non-operating income.
Comments/Outlook
SECO is a major player in power generation. It commands a 45.7% market share in Middle East and
around 85% in Saudi Arabia. The company contributes around 90% to the country’s total power
generation capacity and serves more than 5.42 million customers in Saudi Arabia. Moreover, it
enjoys a monopoly in electricity transmission and distribution services. The company expects to
build a customer base of 7.9 million by the end of 2016 as it seeks to meet the rising demand for
power in the Persian Gulf’s most populated Arab country. It plans to add 12,752 megawatts during
2012–2016.
In an attempt to further expand its business, the company has signed several new business deals
in 2010. In August 2010, SECO awarded generation and transmission projects worth SAR14.7 billion for the expansion of its power generation plant in Rabigh and establishment of a transfer station in Al Jaouf with a capacity of 380 kilovolt. SECO also signed a contract worth SAR12.8 billion
with Doosan Heavy Industries & Construction Ltd to expand Rabigh power plant’s total capacity to
2,555 megawatts annually. SECO has entered into a pact with ABB Ltd to build six substations in
Saudi Arabia. As per the contract, ABB will design, supply, install and commission six substations,
with a capacity of around 110/13.8 kilovolt. This project is scheduled for completion in 2012. The
company is also developing a new substation, which would ensure reliable power supply in Riyadh’s King Abdullah Financial District.
Financials
Exhibit 148: Income Statement (in SAR million)
Total Revenue
2006
2007
2008
2009
2010
19,707
20,839
22,289
23,851
27,858
6%
7%
7%
17%
12,304
13,069
14,563
15,208
17,288
% Change
Cost of Revenue
Gross Profit
7,403
7,770
7,726
8,643
10,570
% Margin
38%
37%
35%
36%
38%
Selling/General/Administrative Expense
183
284
217
316
382
Depreciation/Amortization
6,065
6,372
6,745
7,515
8,355
Operating Income
1,155
1,114
764
812
1,833
% Margin
Other Non-Operating Income (Expense)
Net Income Before Taxes
Provision for Income Taxes
Net Income
4%
4%
3%
3%
7%
259
339
340
358
474
1,414
1,453
1,105
1,170
2,307
0
41
0
0
0
1,414
1,413
1,105
1,170
2,307
% Margin
5%
5%
4%
4%
8%
EPS
0.3
0.3
0.3
0.3
0.6
Source: Reuters Knowledge
125
MENA Year Book - 2011
Exhibit 149: Balance Sheet (in SAR million)
2006
2007
2008
2009
2010
Cash and Short Term Investments
4,201
5,589
1,232
3,883
7,223
Accounts Receivable - Trade, Net
9,630
12,362
14,257
9,675
9,949
911
922
817
911
0
Receivables - Other
Total Inventory
4,696
6,587
5,807
5,623
5,702
Prepaid Expenses
1,580
1,719
2,898
1,956
3,635
Total Current Assets
21,018
27,180
25,011
22,048
26,508
195,311
209,650
231,773
262,264
28,198
(100,994)
(106,945)
(113,561)
(120,940)
0
94,317
102,705
118,212
141,324
161,704
Long Term Investments
748
1,660
2,160
2,353
2,297
Other Long Term Assets
11,125
4,825
0
366
366
Property/Plant/Equipment, Gross
Accumulated Depreciation,
Property/Plant/Equipment, Net
Total Assets
127,208
136,370
145,382
166,091
190,875
Accounts Payable
25,349
32,202
38,279
47,351
49,463
Accrued Expenses
353
455
327
1,440
0
Current Port. of LT Debt/Capital Leases
741
979
556
828
1,189
Dividends Payable
330
283
302
0
0
Other Payables
335
419
289
0
4,405
Other Current Liabilities
233
337
395
0
0
Total Current Liabilities
27,340
34,676
40,149
49,619
55,057
Long Term Debt
23,953
18,784
19,586
21,450
29,320
Pension Benefits - Underfunded
3,974
4,009
4,351
4,422
4,690
Other Long Term Liabilities
24,812
30,907
32,744
41,425
51,121
Total Liabilities
80,079
88,376
96,830
116,916
140,189
Common Stock
41,666
41,666
41,666
41,666
41,666
Retained Earnings (Accumulated Deficit)
Total Equity
Total Liabilities & Shareholders' Equity
5,463
6,328
6,887
7,509
9,020
47,129
47,994
48,553
49,175
50,686
127,208
136,370
145,382
166,091
190,875
2009
2010
Source: Reuters Knowledge
Exhibit 150: Cash Flow Statement (in SAR million)
2006
2007
2008
Cash from Operating Activities
14,322
17,446
18,461
25,162
17,000
Cash from Investing Activities
(12,024)
(15,531)
(22,668)
(32,120)
(27,351)
Cash from Financing Activities
895
(526)
(150)
8,609
14,691
Net Change in Cash
3,193
1,389
(4,357)
1,650
4,340
Net Cash - Beginning Balance
1,008
4,201
5,589
1,232
2,883
Net Cash - Ending Balance
4,201
5,589
1,232
2,883
7,223
Source: Reuters Knowledge
126
MENA Year Book - 2011
Saudi Kayan Petrochemical Company
Key statistics
Shareholding
Sector: Petrochemicals
Price – 16 Feb 2011
SAR18.80
Market Cap (mn)
SAR28,200.00
Price 52wk High/Low
SAR22.9/15.5
Ticker: Bloomberg/
Reuters
KAYAN AB/2350.SE
Public
45.00%
SABIC
Al Kayan Petrochemical
Company
35.00%
20.00%
Foreign ownership limit
49.00%
Shares Outstanding
1,500.00 mn
Exhibit 151: Share Price Chart – 1 year
25.0
22.5
20.0
17.5
15.0
Feb-10
Apr-10
Jul-10
Sep-10
Nov-10
Feb-11
Source: Zawya
Business Description
Saudi Kayan Petrochemical Company, a Saudi Arabia-based public shareholding company, was
established in 2005 through a partnership between Saudi Basic Industries Corp. (SABIC) and AlKayan Petrochemical Company (Kayan). The company went public in April 2007. Saudi Kayan Petrochemical Company operates in the chemicals and petrochemicals industry and manages Saudi
Kayan Industrial Complex (a petrochemical complex located at Jubail Industrial City) that has an
annual production capacity of over 4 million metric tons of petrochemical and chemical products.
The company’s product portfolio includes ethylene, propylene, benzene, polyethylene, polypropylene, ethylene glycols, polycarbonate, ethanolamines, acetone, dimethyl formamide, ethoxylates,
choline chloride, and Bisphenol A.
Financial performance
Since Saudi Kayan Petrochemical Company is yet to commence production, it has not recorded any
product revenues. Net loss decreased by 12.5% to SAR14.7 million, in FY2010 primarily due to
lower pre-operation costs. It is important to note that the financial results are non-comparable as
the company is still in the pre-operational phase and all profits and losses are non-operating. The
company is expected to commence commercial operations in 2012.
127
MENA Year Book - 2011
Comments/Outlook
Saudi Kayan Industrial Complex has drafted major plans to promote specialized chemicals in the
Saudi marketplace. Such products, which would be produced for the first time in the country, are
expected to provide wide opportunities for downstream industries. The company also plans to
establish an applications center focusing on the development of industrial products and applications. The center would stress on polycarbonate research and target other newly added downstream industries in Saudi Arabia. Saudi Kayan Petrochemical Company recently announced it has
begun trial operations of High Density Polyethylene (HDPE) plant and Phenolics plant. Besides this,
it signed an agreement in January 2011 to build and operate N-Butanol plant in Jubail Industrial
City.
Financials
Exhibit 152: Income Statement (in SAR million)
2007
2008
2009
2010
Total Revenue
0
0
0
0
Cost of Revenue
0
0
0
0
Gross Profit
0
0
0
0
SG&A Expense
70
66
5
0
Research & Development
30
30
0
0
Other Operating Expense
26
76
12
14
Total Operating Expense
126
172
17
14
(126)
(172)
(17)
(14)
Interest Income (Expense)
495
677
0
0
Other Non-Operating Income (Expense)
(38)
2
0
0
Net Income Before Taxes
330
507
(17)
(14)
8
13
0
1
Operating Income
Provision for Income Taxes
Net Income
323
494
(17)
(15)
EPS (Basic)
0.22
0.33
(0.01)
(0.01)
Source: Reuters Knowledge
128
MENA Year Book - 2011
Exhibit 153: Balance Sheet (in SAR million)
Cash and Short Term Investments
Total Receivables, Net
Total Inventory
Prepaid Expenses
Property, Plant and Equipment, Total - Net
Other Long Term Assets, Total
Total Assets
Accounts Payable
Current portion of long term debt
Other Current liabilities, Total
Long Term Debt
Other Long Term Liabilities
2007
2008
2009
2010
10,765
3,522
2,472
967
64
64
147
1,298
-
-
-
498
40
24
21
120
4,837
18,764
33,147
40,528
6
27
21
34
15,713
22,402
35,808
43,445
229
540
272
262
-
-
-
580
135
500
883
1,517
-
5,815
19,113
25,535
26
52
62
89
Total Liabilities
391
6,908
20,331
27,983
Common Stock
15,000
15,000
15,000
15,000
Retained Earnings (Accumulated Deficit)
323
494
477
462
Total Equity
15,323
15,494
15,477
15,462
Total Liabilities & Shareholders' Equity
15,713
22,402
35,808
43,445
2009
2010
Source: Reuters Knowledge
Exhibit 154: Cash Flow Statement (in SAR million)
2007
2008
390
577
(946)
(2,758)
Cash from Investing Activities
(4,624)
(17,870)
(13,404)
(5,749)
Cash from Financing Activities
Cash from Operating Activities
15,000
20,815
13,299
7,002
Net Change in Cash
1,389
3,522
(1,051)
(1,505)
Net Cash - Beginning Balance
4,201
0
3,522
2,472
Net Cash - Ending Balance
5,589
3,522
2,472
967
Source: Reuters Knowledge
129
MENA Year Book - 2011
Savola Group
Key statistics
Shareholding
Public
Sector: Agriculture & Food Industries
Price – 16 Feb 2011
SAR29.10
Market Cap (mn)
SAR14,550.00
Price 52wk High/Low
SAR38.30/26.80
Ticker: Bloomberg/
Reuters
SAVOLA AB/2050.SE
60.10%
Mohammed Ibrahim Mohammed Al Issa
General Organization for
Social Insurance
Foreign ownership limit
Shares Outstanding
11.90%
10.90%
49.00%
500.00 mn
Exhibit 155: Share Price Chart – 1 year
40.0
37.5
35.0
32.5
30.0
27.5
25.0
Feb-10
Apr-10
Jul-10
Sep-10
Nov-10
Feb-11
Source: Zawya
Business Description
Established in 1979, the Savola Group is a Saudi Arabia-based company that is primarily engaged in
manufacturing and marketing vegetable oils, food products, retailing, packaging materials and fast
food operations. The Savola Group operates through four core sectors: (i) Savola Foods Sector,
dealing in edible oils, foods and sugar; (ii) Savola Retail Sector, which operates retail stores (Panda
and Hyper Panda); (iii) Real Estate Sector (Kinan International) and; (iv) Savola Plastics Sector. The
group also has a franchising unit that has exclusive rights in Saudi Arabia for 10 international
brands of fashion wears from different countries.
The Savola Group also holds stake in Al Marai Dairy Company (30%), Herfy Foods Services Company (49%), Jordanian Tameer Company (5%), Knowledge Economic City (Madinah) and King Abdullah Economic City (Rabigh). The company employs over 17,000 people, both inside KSA and
overseas.
Financial performance
Savola posted revenues of SAR21,055.6 million in 2010, up 17.5% y-o-y. As has been the case in
previous years, retail sales and edible oil sales contributed to over 75% of the group’s top line.
Savola has been focusing and consolidating interests in the retail sector.
130
MENA Year Book - 2011
The group’s Panda retail chain is a dominant player in the Kingdom’s grocery retail market; it
bought Al-Hokair Group’s 7% stake in Azizia Panda for SAR297.6 million in September 2010. In
addition, Savola has a 62% share in Saudi Arabia’s edible oil market. However, despite growth in
revenues, the group earned lower gross profit margins of 15.8% in 2010 as compared to 17.3% in
2009 due to higher commodity food prices.
Savola ended 2010 with a net income of SAR886.7 million for an EPS of SAR1.77 as compared to a
net income of SAR951.6 million for an EPS of SAR1.90 in 2009. The group’s 2010 net income was
affected by impairment losses of SAR283.8 million relating to provisions for accumulated losses in
the food division and decline in its investment’s market value.
Comments/Outlook
Savola has a clear two-fold strategy: focus on accelerating growth in the core businesses; and leverage on core competencies. The group has been buying out minorities and undertaking organic
expansion in edible oil, sugar and food retail businesses. Savola has also been taking steps to leverage its branding power, geographical footprint, logistics infrastructure and distribution network.
The group spent over SAR1.2 billion to buy an additional 5% stake in Savola Foods Company, acquire minority shareholdings of Afia Egypt and New Marina Egypt, buy Saudi Géant, and acquire
Tate and Lyle’s shareholding in the sugar business. Savola realized SAR550 million cash by exiting
non-core investments.
Financials
Exhibit 156: Income Statement (in SAR million)
2006
2007
2008
2009
2010
Total Revenue
9,097
10,410
13,821
17,917
21,056
% Change
32.7%
14.4%
32.8%
29.6%
17.5%
Cost of Sales
7,553
8,706
12,007
14,810
17,723
Gross Profit
1,543
1,704
1,814
3,107
3,332
Margin %
17.0%
16.4%
13.1%
17.3%
15.8%
Selling & General expenses
863
1,039
1,289
2,162
2,494
Depreciation/Amortization
128
117
160
0
0
73
250
582
222
284
479
297
(217)
723
554
5.3%
2.9%
-1.6%
4.0%
2.6%
841
1,108
492
671
652
26
49
(52)
(147)
(54)
1,347
1,453
223
1,247
1,152
Other Operating Expenses
Operating Income
Margin %
Interest Income (Expenses)
Other, Net
Net Income Before Taxes
Provision for Income Taxes
46
115
53
63
128
Net Income After Taxes
1,301
1,338
170
1,183
1,024
Net Margin %
14.3%
12.9%
1.2%
6.6%
4.9%
Minority Interest
(152)
(108)
32
(232)
(137)
Net Income
1,149
1,230
202
952
887
1.41
1.44
0.40
1.90
1.77
EPS
Source: Reuters Knowledge
131
MENA Year Book - 2011
Exhibit 157: Balance Sheet (in SAR million)
Cash and Short Term Investments
2006
2007
2008
2009
2010
2,918
1,282
753
1,091
845
Total Receivables, Net
1,047
664
920
1,417
1,518
Total Inventory
1,377
1,267
2,099
2,408
2,513
Prepaid Expenses
551
534
1,017
829
981
Other Current Assets, Total
(39)
(35)
(60)
(111)
0
Total Current Assets
5,854
3,711
4,729
5,634
5,858
Property/Plant/Equipment, Total - Gross
4,775
5,393
6,658
8,494
NA
(1,791)
(1,879)
(2,407)
(2,957)
NA
2,984
3,514
4,251
5,537
4,719
Accumulated Depreciation, Total
Property/Plant/Equipment, Total - Net
Intangibles, Net
Long Term Investments
Other Long Term Assets, Total
Total Assets
Accounts Payable
Accrued Expenses
Notes Payable/Short Term Debt
Current Port. of LT Debt/Capital Leases
Other Current liabilities, Total
Total Current Liabilities
205
238
654
918
1,020
2,154
4,048
4,771
5,056
6,123
78
78
140
112
0
11,275
11,590
14,546
17,257
17,720
866
782
1,216
1,830
2,003
929
910
1,324
1,461
1,689
1,703
1,314
3,294
2,227
2,074
131
133
140
795
708
0
0
0
0
186
3,630
3,139
5,973
6,313
6,662
Long Term Debt
560
457
1,117
1,996
2,393
Minority Interest
792
616
748
1,567
1,188
Other Liabilities, Total
210
222
319
419
447
Total Liabilities
5,191
4,433
8,157
10,296
10,689
Common Stock, Total
3,750
3,750
5,000
5,000
5,000
Retained Earnings (Accumulated Deficit)
2,383
3,048
1,677
2,176
2,386
54
451
(127)
(22)
(82)
Unrealized Gain (Loss)
Other Equity, Total
(103)
(92)
(161)
(194)
(274)
Total Equity
6,084
7,157
6,389
6,961
7,031
11,275
11,590
14,546
17,257
17,720
Total Liabilities & Shareholders' Equity
Source: Reuters Knowledge
Exhibit 158: Cash Flow Statement (in SAR million)
2006
2007
2008
2009
2010
Cash from Operating Activities
325
887
472
2,342
1,768
Cash from Investing Activities
536
(2,548)
(2,351)
(1,500)
(1,255)
Cash from Financing Activities
1,757
(829)
2,153
(444)
(886)
0
(2,490)
274
397
(374)
2,618
2,820
330
604
1,001
202
330
604
1,001
628
Net Change in Cash
Net Cash - Beginning Balance
Net Cash - Ending Balance
Source: Reuters Knowledge
132
MENA Year Book - 2011
Telecom Egypt SAE
Key statistics
Shareholding
Sector: Telecommunications
Price – 27 Jan 2011
EGP16.03
Market Cap (mn)
EGP27,364.33
Price 52wk High/Low
Government of Egypt
80.00%
Public
20.00%
Foreign ownership limit
100.00%
EGP20.49/14.92
Shares Outstanding
Ticker: Bloomberg/
Reuters
1,707.07 mn
ETEL EY/ETEL.CA
Exhibit 159: Share Price Chart – 1 year
22
20
18
16
14
Jan-10
Apr-10
Jun-10
Aug-10
Nov-10
Jan-11
Source: Zawya
Business Description
Telecom Egypt is a provider of landline, retail and wholesale telecommunication services in Egypt.
Retail services of Telecom Egypt include access revenues, voice revenues, international service
revenues and data transmission revenues. Wholesale services include broadband capacity leasing,
internet services, and national and international interconnection services.
In terms of revenue mix, retail services accounted for 58% of the total revenues in 2009, while
wholesale services contributed to the rest. Contribution of wholesale services has increased from
39% in 2008.Telecom Egypt had 9.4 million voice customers and over 819,000 broadband subscribers at the end of September 2010. The company also owns a 44.95% stake in Vodafone Egypt.
Financial performance
For nine months ending September 30, 2010, Telecom Egypt reported revenues of EGP7,793.3
million, up 0.7% y-o-y. In terms of segmental growth, wholesale services grew 17% y-o-y as against
a 5% decline in retail services. The rise in revenues from wholesale services can be ascribed to
growth in domestic wholesale, particularly due to infrastructure leasing to mobile providers and
ISPs, with some additional growth in mobile interconnections. Income from Vodafone Egypt added
EGP1,022 million to Telecom Egypt’s net profit in 9M 2010.
133
MENA Year Book - 2011
Despite a highly competitive mobile market in the country, Vodafone Egypt has gained market
share and increased its customer base to about 29 million subscribers as on September 30, 2010.
Consolidated net profit for the nine months of 2010 was EGP2,728.5 million, a 5.9% rise y-o-y. This
translates into an EPS of EGP1.60 for the company.
Comments/Outlook
Financials of the last four years clearly indicate that Telecom Egypt has not recorded much growth.
This is driving the biggest telecom operator in Egypt to look at ways to increase exposure in the
mobile market through several alternatives. These include enhancing stake in Vodafone Egypt or
applying for the fourth mobile license in Egypt, among others.
Telecom Egypt recently declared that it is now considering acquiring a Mobile Virtual Network
Operator (MVNO) license. This news was taken positively by investors since an MVNO requires less
capital expenditure, both for acquiring the license as well as rolling out services. Minimal investments in the MVNO would leave the company with ample free cash, which could be used to reward shareholders. Telecom Egypt had cut the shareholders’ dividend by 40% to EGP0.75 in 2009
from EGP1.30 in 2008 to save cash to acquire growth.
Financials
Exhibit 160: Income Statement (in EGP million)
2006
2007
2008
2009
9M2010
Total Revenue
9,517
9,993
10,117
9,960
7,793
% Change
11.3%
5.0%
1.2%
-1.5%
0.7%
Cost of Sales
1,478
1,447
1,270
999
4,322
Gross Profit
8,039
8,546
8,847
8,961
3,471
Margin %
84.5%
85.5%
87.4%
90.0%
44.5%
Selling & General expenses
1,322
1,485
1,782
1,911
1,458
Depreciation/Amortization
2,726
2,737
2,550
2,475
0
Other Operating Expenses
1,784
2,172
2,577
2,631
0
Operating Income
2,207
2,153
1,937
1,945
2,013
Margin %
23.2%
21.5%
19.1%
19.5%
25.8%
155
466
1,119
1,407
(114)
Interest Income (Expense)
Other, Net
Net Income Before Taxes
Provision for Income Taxes
536
436
251
158
236
2,898
3,054
3,308
3,510
2,135
468
513
512
453
426
Net Income After Taxes
2,430
2,541
2,795
3,057
1,709
Net Margin %
21.9%
25.5%
25.4%
27.6%
30.7%
Minority Interest
(3)
(7)
(6)
(5)
(1)
Equity In Affiliates
0
0
0
0
1,020
2,427
2,534
2,790
3,051
2,728
1.42
1.48
1.63
1.79
1.60
Net Income
EPS
Source: Reuters Knowledge
134
MENA Year Book - 2011
Exhibit 161: Balance Sheet (in EGP million)
Cash and Short Term Investments
Total Receivables, Net
Total Inventory
Other Current Assets, Total
Total Current Assets
Property/Plant/Equipment, Total - Gross
Accumulated Depreciation, Total
Property/Plant/Equipment, Total - Net
Long Term Investments
Other Long Term Assets, Total
2006
2007
2008
2009
9M2010
712
1,397
2,735
2,453
4,158
4,653
4,792
4,834
4,353
4,312
598
508
473
414
392
0
0
0
0
0
5,963
6,698
8,042
7,220
8,862
39,496
40,438
41,399
42,556
42,573
(17,411)
(20,222)
(22,759)
(25,187)
(26,529)
22,085
20,216
18,640
17,368
16,044
6,614
7,027
7,024
7,731
7,177
1,267
650
164
142
263
35,929
34,591
33,870
32,461
32,346
Accounts Payable
182
130
205
157
3,709
Accrued Expenses
301
266
338
366
0
93
7
7
7
10
Current Port. of LT Debt/Capital Leases
1,291
1,827
1,513
179
153
Other Current liabilities, Total
3,185
3,255
3,371
3,570
353
Total Current Liabilities
5,052
5,486
5,434
4,278
4,224
Long Term Debt
6,105
3,151
1,626
858
742
116
108
78
0
0
35
40
38
41
19
Total Assets
Notes Payable/Short Term Debt
Deferred Income Tax
Minority Interest
Other Liabilities, Total
58
62
63
57
158
Total Liabilities
11,366
8,847
7,239
5,234
5,142
Common Stock, Total
17,071
17,071
17,071
17,071
17,071
0
0
0
0
0
Additional Paid-In Capital
Retained Earnings (Accumulated Deficit)
7,493
8,674
9,561
10,157
10,133
Total Equity
24,563
25,745
26,631
27,228
27,204
Total Liabilities & Shareholders' Equity
35,929
34,592
33,870
32,462
32,346
Source: Reuters Knowledge
Exhibit 162: Cash Flow Statement (in EGP million)
2006
2007
2008
2009
9M2010
Cash from Operating Activities
3,578
3,445
2,596
1,906
3,234
Cash from Investing Activities
(6,265)
(149)
515
(65)
(1,711)
Cash from Financing Activities
2,572
(2,487)
(1,826)
(2,085)
(2,191)
Net Change in Cash
(115)
809
1,284
(244)
(668)
Net Cash - Beginning Balance
598
484
1,293
2,577
2,333
Net Cash - Ending Balance
484
1,293
2,577
2,333
1,665
Source: Reuters Knowledge
135
MENA Year Book - 2011
Yanbu National Petrochemicals Co
Key statistics
Shareholding
Sector: Petrochemicals
Price – 16 Feb 2011
SAR45.00
Market Cap (mn)
SAR25,312.50
Price 52wk High/Low
SAR50.00/31.80
Ticker: Bloomberg/
Reuters
YANSAB AB/2290.SE
Saudi Basic Industries Corporation
51.00%
Public
31.22%
General Organization for
Social Insurance
Foreign ownership limit
Shares Outstanding
9.20%
49.00%
562.50 mn
Exhibit 163: Share Price Chart – 1 year
60
54
48
42
36
30
Feb-10
Apr-10
Jul-10
Sep-10
Nov-10
Feb-11
Source: Zawya
Business Description
Established in 2006, Yanbu National Petrochemicals Company (Yansab) is a Saudi Arabia-based
public joint stock company operating in the petrochemicals industry. The company manufactures
petrochemical products such as ethylene, propylene, mono-ethylene glycol (MEG), di-ethylene
glycol, tri-ethylene glycol, polypropylene, low linear density polyethylene, high-density polyethylene, butane, methyl-butyl ether (MTBE), and benzene.
Yansab has an annual production capacity of 4.0 million tons of petrochemical products. The company was listed on the Tadawul Stock Exchange (TASI) following an IPO in February 2006. Yansab is
a subsidiary of Saudi Basic Industries Corporation (SABIC), which has 51% stake in the company.
Financial performance
For the fiscal year ended December 31, 2010, Yanbu National Petrochemicals Company's revenues
totaled SAR5.8 billion. No comparative figures are available for the previous year since Yansab
started commercial operations in March 2010. The growth in revenues was primarily driven by an
increase in prices and higher sales volume of polymers and mono-ethylene glycol (MEG). Most
petrochemical companies benefited from the improved price environment in 2010. Yansab’s operating income totaled SAR167.4 million in 2010. The company’s operating margins came in at 28.7%
in the year; certain technical faults at the plant site negatively affected margins in 3Q2010.
136
MENA Year Book - 2011
Yansab’s operating income totaled SAR167.4 million in 2010. The company’s operating margins
came in at 28.7% in the year; certain technical faults at the plant site negatively affected margins
in 3Q2010. Yansab recorded a net profit of SAR1.7 billion in 2010 as against a net loss of SAR29.2
million in the previous year.
Comments/Outlook
Yansab is handling one of the two major capex projects currently being undertaken by the SABIC
group at Yanbu on the west coast. Yansab mainly focuses on the production of basic chemicals
such as ethylene and propylene, and helps its parent company SABIC meet demand from Asia and
other growing markets. Lowest feedstock costs, favorable government policies, growing demand
from Asian countries and large-scale capacity expansions are likely to improve the performance of
petrochemical companies in Saudi Arabia.
Yansab benefits from SABIC’s infrastructure, which includes financial support, cheaper feedstock
and marketing channels.
Financials
Exhibit 164: Income Statement (in SAR million)
2006
2007
2008
2009
2010
Total Revenue
0
0
0
0
5,822
Cost of Revenue
0
0
0
0
3,652
Gross Profit
0
0
0
0
2,170
37%
Margin %
SG&A Expense
Other Operating Expense
Total Operating Expense
Operating Income
0
0
0
0
49
83
26
29
123
0
0
0
0
376
49
83
26
29
4,151
(49)
(83)
(26)
(29)
1,670
29%
0
0
0
0
Other Non-Operating Income (Expense)
193
197
0
0
43
Net Income Before Taxes
144
114
(26)
(29)
1,713
Margin %
Provision for Income Taxes
Net Income
Net Margin %
EPS
4
4
0
0
40
140
110
(26)
(29)
1,673
0
0
0
0
29%
0.25
0.20
(0.05)
(0.05)
2.97
Source: Reuters Knowledge
137
MENA Year Book - 2011
Exhibit 165: Balance Sheet (in SAR million)
Cash & Cash Equivalents
2006
2007
2008
2009
2010
821
1,694
1,033
606
790
Total Receivables, Net
0
0
77
865
2,736
Total Inventory
0
0
8
738
901
Prepaid Expenses
Property, Plant and Equipment, Total - Net
Intangibles, Net
Other Long Term Assets, Total
Total Assets
37
281
99
0
0
6,137
12,987
17,105
18,576
18,426
80
200
200
200
176
6
147
155
140
135
7,082
15,309
18,677
21,124
23,163
Accounts Payable
211
105
63
276
256
Accrued Expenses
1,081
1,267
1,039
488
1,058
0
0
669
916
947
13,464
Current portion of long term debt
Long Term Debt
0
8,166
11,128
13,696
37
49
81
81
98
Total Liabilities
1,329
9,587
12,980
15,456
15,823
Common Stock
5,625
5,625
5,625
5,625
5,625
128
98
72
43
1,715
Other Long Term Liabilities
Retained Earnings (Accumulated Deficit)
Total Equity
5,753
5,723
5,697
5,668
7,340
Total Liabilities & Shareholders' Equity
7,082
15,309
18,677
21,124
23,163
Source: Reuters Knowledge
Exhibit 166: Cash Flow Statement (in SAR million)
2006
2007
2008
2009
2010
Cash from Operating Activities
1,402
1,220
(178)
(1,787)
1,697
Cash from Investing Activities
(6,223)
(13,334)
(4,126)
(1,455)
(1,312)
Cash from Financing Activities
5,643
13,809
3,642
2,814
(201)
821
1,694
(661)
(427)
184
0
0
1,694
1,033
606
821
1,694
1,033
606
790
Net Change in Cash
Net Cash - Beginning Balance
Net Cash - Ending Balance
Source: Reuters Knowledge
138
MENA Year Book - 2011
Al Masah Capital Management Limited
Level 9, Suite 906 & 907
ETA Star - Liberty House
Dubai International Financial Centre
Dubai-UAE
P.O.Box 506838
Tel:
+971 4 4531500
Fax:
+971 4 4534145
Email: [email protected]
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This report is prepared by Al Masah capital Management Limited (“AMCML”). AMCML is a company incorporated under the
DIFC Companies Law and is regulated by the Dubai Financial Services Authority (“DFSA”). The information contained in this
report does not constitute an offer to sell securities or the solicitation of an offer to buy, or recommendation for investment in,
any securities in any jurisdiction. The information in this report is not intended as financial advice and is only intended for professionals with appropriate investment knowledge and ones that AMCML is satisfied meet the regulatory criteria to be classified as a ‘Professional Client’ as defined under the Rules & Regulations of the appropriate financial authority. Moreover, none
of the report is intended as a prospectus within the meaning of the applicable laws of any jurisdiction and none of the report is
directed to any person in any country in which the distribution of such report is unlawful. This report provides general information only. The information and opinions in the report constitute a judgment as at the date indicated and are subject to change
without notice. The information may therefore not be accurate or current. The information and opinions contained in this
report have been compiled or arrived at from sources believed to be reliable in good faith, but no representation or warranty,
express, or implied, is made by AMCML, as to their accuracy, completeness or correctness and AMCML does also not warrant
that the information is up to date. Moreover, you should be aware of the fact that investments in undertakings, securities or
other financial instruments involve risks. Past results do not guarantee future performance. We accept no liability for any loss
arising from the use of material presented in this report. This document has not been reviewed by, approved by or filed with the
DFSA. This report or any portion hereof may not be reprinted, sold or redistributed without our prior written consent.
Copyright © 2011 Al Masah Capital Management Limited
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