Naqi’s quarterly profit shrinks 38% on higher cost of sales ‎

The financial statements of Naqi Water Co. revealed a decline in the company’s profits by 37.97% at the end of the third quarter of this year, to reach 14.957 million riyals, compared to profits of 24.114 million for the same period last year.

The company said in a statement to the Saudi market, “Tadawul”, today, Thursday, that the decline in profits during the comparison periods is due to the increase in the cost of sales by 19%, driven by the rise in the costs of production inputs from raw materials, which was affected by the high rates of inflation and the prices of basic materials that enter into This formation of raw materials is in addition to the company being affected by the obstacles affecting the supply and supply chains, which affected the cost of operating elements. As this increase led to a decrease in gross profit by 24%

The company also attributed the decrease in quarterly profits to an increase in selling and distribution expenses by 37% as a result of the company’s expansion in new sales and distribution channels and the increase in the number and competencies of sales and distribution cadres in order to maintain its market share and acquire an additional market share in accordance with the company’s strategy aimed at increasing sales outlets and maintain continuous access to target customers.

On the other hand, the quantity and value of sales increased, and the company achieved revenues higher than the same quarter by 0.5%, driven by the company’s continued maintenance of its market share and its customers in various outlets. Other revenues increased by 222%, driven by the improvement in the performance of supporting activities and the application of sustainability standards in the disposal of scrap resulting from production operations. The company’s general and administrative expenses decreased by 10.6% as a result of enhancing administrative performance targets and developing work mechanisms in various departments.

The company achieved profits of 46.198 million riyals at the end of the first nine months of this year, compared to profits of 63.007 million riyals in the same period of the previous year, with a decrease in profits by 26.68%.

The decrease of 36.7% in the profit for the third quarter attributed to shareholders of the company as compared to the corresponding quarter of last year is due to:

Revenue: the revenue growth of 0.05% was mainly driven by the company’s ability to sustain its market share and customers across all its sales venues.

The increase of Cost of Goods Sold (COGS): the increase of 19% was driven by the increase in the costs of raw materials that were impacted by the global inflation rates in addition to the difficulties in the supply chain and the increase in operational costs. This increase has influenced gross profit that declined by 24%.

The increase in sales and distribution: the increase of 37% in sales and distribution expenses was driven by the company’s expansion in opening new sales channels and enhancing the qualifications of its sales staff. This expansion is part of the company’s plans that aim at acquiring additional market share and reaching customers in different regions.

The decrease in general and administrative expenses: the decline of 10.6% was driven by the adoption of new models that improved the workflow across the company’s departments.

Other revenues: the growth of 222% was mainly influenced by improving the business process related to support activities and by sustaining the process of scrap disposal.

The decrease of 28.7% in the profit for the third quarter attributed to shareholders of the company as compared to the previous quarter of the current year is due to:

Revenue: the decline of 1.6% was mainly driven by the seasonal circumstances related to the company’s products.

The increase in Cost of Goods Sold (COGS) of 7.4% is due to the continuous increase in the costs of raw materials and production inputs in response to the local and global inflation rates.

The decrease in gross profit of 16.1% was due to the combined effect of the decrease in revenue and increase in COGS.

The increase in sales and distribution expenses of 3% was driven by the expansion of sales channels and attracting qualified sales staff.

The increase in general and administrative expenses of 6% was in response to the company’s growth in its operations and staff development.

The decrease of 26.1% in the profit of the current period attributed to shareholders of the company as compared to the corresponding period of the last year is due to:

The revenue growth of 0.7% was mainly driven by expansion in sales, sustaining the company’s market share and acquiring new sales channels.

The increase in the Cost of Goods Sold (COGS) of 13.4% was driven mainly by the increase in the costs of raw material and production costs in response.

The increase in sales and distribution expenses of 24.4% was mainly driven by the company’s expansion in sales operations, acquiring new market share and attracting qualified sales staff.

The decrease in general and administrative expenses of 7.5% was influenced by the improvement of the workflow across the company’s departments.

The increase of other revenues of 1567% that was driven by enhancing the process related to support activities and scrap disposals.

Additional Information:

The operating cash flow for the current period ending 30 September 2022 grown by 10.4% compared to the corresponding period of the las year.

The total assets grown by 19.3% during the period ending 30 September 20200 due to the increase of current assets (inventory, accounts receivables, and cash and cash equivalent) which would enable the company to efficiently manage its working capital and reduce operational risks.

The earning per share (EPS) for the current period ending 30 September 2022 was recorded as of SAR 2.33.

The increase in the costs of raw materials and production costs represents the major factor that the company is managing during the next quarter. However, the company expects a lower impact during the fourth quarter compared to the previous period ending 30 September 2022.