TLDR:
• Profit drop beats market expectations
• Dividend payout increased significantly
• Revenue rises despite net profit fall
RIYADH (The Thursday Times) — Saudi Telecom Company (STC) has experienced a dip in its third-quarter net profit, marking a significant moment in the kingdom’s telecommunications industry. The company, recognised as Saudi Arabia’s largest mobile operator, disclosed that its net profit had fallen over five percent compared to the same period last year, reaching SAR 4.64 billion ($1.23 billion). Despite this decline, the earnings comfortably surpassed market forecasts, which had predicted a far more substantial drop, pegged at an average SAR 3.53 billion by analysts, according to LSEG data.
This unexpected performance amid declining net profits comes in the wake of unusual financial gains last year, notably from the sale of land in Alkhobar City, which had significantly boosted earnings. The one-time gain from that transaction amounted to SAR 1.29 billion, creating a notable high base effect for comparison. Thus, when assessing this quarter’s performance, it is crucial to contextualise the decline within the extraordinary financial circumstances of the previous year.
Revenue growth defies profit dip
While net profit was under pressure, STC reported that revenue had continued on a positive trajectory, growing three percent to SAR 18.6 billion. The company attributed this increase to robust expansion across its various business segments within Saudi Arabia. The diversification and sustained investment in the telecommunications and digital sectors were key factors underpinning this revenue growth, despite the broader economic challenges the region faces. The revenue increase highlights STC’s ability to generate steady cash flow, even in a quarter marked by the comparative disadvantage of lacking substantial land sales.
Dividend strategy signals investor confidence
The company’s board announced an impressive increase in the annual dividend payout, demonstrating a commitment to delivering value to shareholders. Beginning in the fourth quarter of 2024, the dividend will be raised by 37.5 percent, from SAR 1.6 to SAR 2.2 per share. Over the next three years, this increase will elevate STC’s total annual dividend distribution from SAR 8 billion to SAR 11 billion. Such a decision underscores STC’s strategic approach to ensuring long-term investor trust, despite fluctuating profit margins. This aggressive dividend policy could be interpreted as a signal of confidence in the company’s ongoing revenue streams and market position.
