Prevailing market conditions including the higher cost of fuel and inflationary pressures are impacting profit margins

Prevailing market conditions are creating headwinds for industries and organisations around the Gulf region.

As listed companies release their financial results for the first half of 2022, several are citing the pressure created on profit margins by challenges such as geopolitical tensions, supply chain delays and inflation.

UAE-based Fujairah Cement Industries (FCI) reported a net loss of AED29.6m ($8m) for the first half of 2022 on the back of rising energy costs.

Revenue for the period reached AED176.3m, a 19 per cent drop compared to the same period last year. The company attributes this to lower cement and clinker sales, and the rising cost of coal used to power production plants.

“Increasing inflation due to current geopolitical situation has increased the cost of fuel and energy across the globe which has adversely affected the profitability of cement plants,” it said in a statement.

FCI will cease trading on Boursa Kuwait on 30 November and has asked existing shareholders to open an account with Abu Dhabi Securities Exchange (ADX) to continue trading.

In a similar tune, Abu Dhabi-listed drug manufacturer Gulf Pharmaceutical Industries (Julphar) has reported a net profit of AED5.2m for the second quarter of 2022, compared to AED73.4m recorded in Q2 2021. This is despite net sales growing by over 90 per cent.

Julphar says that geo-economic headwinds have impacted sales in markets such as Algeria, Ethiopia and Morocco. 

On the logistics front, Dubai-listed Aramex has seen profits drop year-on-year as a result of post-Covid resumption in physical shopping and exchange rate impacts from Lebanese and Egyptian pounds.

Q2 2022 profits for Aramex stand at AED44.6m ($12.4m), a drop of 22 per cent compared to Q2 2022. 

“The Covid years of 2020 and 2021 drove hyper-activity in the express and last mile sector, however this phenomenon is starting to fade,” said Alaa Saoudi, chief operating officer of Aramex Express, in an official statement. “This year, we started to see a normalisation in e-commerce activities as well as macroeconomic headwinds.”

Organisations remain cautious even when higher profits have been reported. In its half year financial results, Saudi Basic Industries Corporation (Sabic) has stated that it expects margins to be under pressure in H2 2022 despite a second quarter net-profit rise of 4 per cent. 

“Due to slowdown in global GDP growth, lockdowns in China, conflict in Europe and continued supply chain challenges, we expect margins to be under pressure in the second half of 2022,” said the chemicals giant.

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