Performance of SAOG companies: No surprises in Q3

This year, there were no surprises in the third quarter of the year. As has been the pattern for the previous two quarters, on the back of rising interest rates, the banks within the financial services sector have delivered positive results, unlike the industrial companies that have generally delivered flat or below par results.

In the Financial sector, similar to all banks throughout the world, the Omani banks have led the way with improved net interest income as a result of customer loan borrowing rates increasing at a faster pace than customer deposit rates, half of which remain fixed at zero% (i.e. current and savings accounts), combined with lower loan impairment charges. However, many commentators are speculating that loan impairment charges are set to rise as borrowers find it hard to service loans at the higher interest rates. It is notable that there are still no published third quarter results from the insurance companies. This is due entirely to a time extension provided by the CMA, as this quarter they will report for the first time in accordance with the new IFRS 17 accounting standard. Although the financial impact of the changing accounting standard is set to have a big impact on the large European insurers, the impact will be muted in Oman, as the insurers engage in short term (e.g. motor) business and take high proportions of reinsurance cover.

The results of Industrial sector, comprising of construction, manufacturing and real estate companies, essentially tells the story of two companies. In 2022, Raysut Cement cleaned up their balance sheet and shocked the market with losses of RO 90m, following write downs to their investments in subsidiaries. The big story in 2023 comes from Oman Cables, who have reported double profits of RO 15m, generated primarily from their Omani and Indian subsidiaries that have leveraged on favourable market conditions, high yielding product mix / market channels and strict financial discipline combined with commercial strategies focused on diversification and penetration into new market segments.

Finally, as we look at the Service sector, again most companies have reported relatively flat results, with the exception of Ooredoo that reported a halving of profits to RO 8m. With the entrance of Vodafone, the telecoms market remains highly competitive, as industry players are actively vying for market share. Despite increasing customer numbers, revenue recorded a decline and operating costs saw an increase.