Saudi Arabia's BinDawood second-quarter profit slips on lower revenue

The company benefitted from pantry-stocking in response to the pandemic and ahead of a VAT increase in July 2020

BinDawood Holdings said the company’s financial position remains strong with no bank debt. Courtesy Bindawood Holding

BinDawood Holding, one of Saudi Arabia's biggest grocery retailers, reported a nearly 49 per cent drop in second quarter net profit on higher fixed costs and lower sales.

Net profit for the three months to the end of June fell to 94.9 million Saudi riyals ($25.3m), compared with 185.4 riyals in the same quarter of 2020, the retailer said in a statement on Sunday to the Tadawul stock exchange, where its shares are traded. Quarterly revenue dropped 27 per cent year-on-year to 1.1 billion riyals from the same period a year earlier, due to a one-off boost in sales from people stocking up on groceries during the Covid-19 pandemic.

"I believe a comparison of the financial performance of H1 2021 with H1 2020 is not very meaningful because of the extenuating circumstances and unprecedented disruption to business caused by the pandemic," Ahmad BinDawood, chief executive of BinDawood Holding, said.

The second quarter of 2020 "benefitted enormously from pantry-buying in response to lockdowns and in the lead-up to the VAT hike, which came into effect from July 1, 2020," he added.

The retailer's Danube stores recorded sales of 805.9m riyals in the second quarter of 2021, down from 1.09bn riyals in the same period a year earlier.

Bindawood operates 74 stores across the kingdom – 51 of which are hypermarkets and 23 supermarkets – under the Bindawood and Danube brands.

Operating expenses in the second quarter fell 3 per cent to 284.4m riyals from the same period a year earlier. This was due to a reduction in Covid-19 related expenses and savings from the favourable renegotiation of a rental contract despite the impact of fixed costs of new store openings in 2020, the company said.

Net profit for the first six months of 2021 fell nearly 50 per cent year-on-year to 157.1m riyals. That was largely due to revenue declining 24 per cent to 2.2bn riyals in the first half of the year.

The first half of 2021 "bore the full impact of the pandemic, resulting in a sharp drop in pilgrim traffic due to restrictions on international travel and a significant drop in promotional activity due to the need to adhere to social distancing measures", Mr BinDawood said.

The grocery retailer's Danube stores posted revenue of 1.6bn riyals in the first half of 2021, compared with 2.04bn in the same period last year.

"Although revenue of Danube stores remained flat during H1 2021, customer traffic increased during the latter part of H1 2021, and with further restrictions lifting in the second half 2021, the company anticipates trading to improve across its 47 stores," it said.

Operating expenses fell to 573m riyals in the first half of this year, compared to 597.6m Saudi riyals in the corresponding period last year. However, fixed costs increased due to new store openings during 2020, which were offset against 32.1m riyals in expense savings, the retailer said.

"The company's financial position continued to be strong with no bank debt," BinDawood said.

Cash generated from operations in the first half of 2021 fell to 461.2m riyals, from 596.6m riyals in the prior-year period, due to higher profitability and lower working capital investment in 2020.

As of June 30, the company had a cash balance of 526.4m riyals, an increase of 32.7 per cent from March 31.

BinDawood's board approved a half-year dividend of 1.25 riyals per share, or 142.875m riyals. The cash dividend is payable to shareholders of record by the close of business within two weeks of August 26, 2021, it said.