Qomel Profit Plunges 64% in Nine-Month Period

Riyadh, Saudi Arabia — Qomel Co. reported a sharp decline in earnings for the nine months ending September 30, 2026. Net profit attributable to shareholders fell 64.05% to 6.07 million SAR, down from 16.88 million SAR in the same period a year earlier. Falling government sales, rising operating expenses, and a compressed gross margin drove the deterioration.

Quarterly Breakdown

In the third quarter alone, Qomel posted net profit of 2.45 million SAR — a 51.41% drop from 5.03 million SAR in the same quarter last year. Quarter-on-quarter, profit fell 39.92% from 4.07 million SAR in Q2. Revenue for Q3 came in at 35.32 million SAR, down 12.02% year-on-year and down 22.24% from the 45.42 million SAR recorded in Q2. Despite the revenue slide, the gross profit margin improved to 29.16% in Q3, compared with 26.67% a year earlier and 27.44% the prior quarter — a signal that cost control is gaining traction even as top-line pressure mounts.

Key Drivers

• Government and semi-government sales declined by 10.86 million SAR over the nine-month period, the primary cause of the revenue drop.
• Private-sector sales grew modestly — up 0.29 million SAR for the nine months, and rising to 2.11 million SAR in Q3 from 0.48 million SAR a year earlier.
• Selling, marketing, general, and administrative expenses rose 5.41 million SAR year-on-year for the nine-month period, reflecting Qomel’s push into private-sector markets.
• Subsidiary Qomel Factory Company’s general and administrative expenses surged to 3.91 million SAR from 0.77 million SAR, a significant drag on the industrial segment.
• Expected credit loss provisions increased by 0.48 million SAR for the nine-month period and by 0.26 million SAR in Q3 alone.
• Finance costs fell 0.65 million SAR over nine months, providing a partial offset to other cost pressures.
• Gross profit margin contracted to 28.49% for the nine-month period, versus 30.48% a year earlier.

Management & Outlook

Management attributed the surge in selling and marketing expenses to a deliberate strategy — expanding the company’s private-sector footprint and diversifying away from government contracts. The early results show private-sector sales growing, though from a low base. Meanwhile, the nine-month gross profit declined 15.40% to 28.72 million SAR from 33.94 million SAR. Total shareholders’ equity rose 5.77% year-on-year to 126.80 million SAR, suggesting the balance sheet remains stable even as profitability erodes. Earnings per share dropped to 0.87 SAR from 2.41 SAR a year earlier. The external auditor issued an unmodified conclusion on the interim financials.

What This Means for Investors

• The 64% collapse in nine-month net profit is not a one-quarter blip — it reflects structural revenue pressure from government clients that has persisted throughout 2026.
• Qomel is spending heavily to build private-sector sales, but the payoff remains small relative to what it has lost from government contracts.
• The improving gross margin in Q3 is a constructive sign, but rising operating expenses are absorbing that margin recovery before it reaches the bottom line.
• At 0.87 SAR earnings per share for nine months, investors should reassess full-year profit expectations against whatever valuation multiple they assigned at the start of the year.

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THE SAUDI STANDARD’S VIEW: QOMEL’S PROFIT COLLAPSE EXPOSES THE COST OF REINVENTION

Qomel’s nine-month results represent more than a disappointing earnings season — they document a company in the middle of a painful but deliberate structural transition. The 64% decline in net profit is the financial price of pivoting away from government dependency, and investors must now judge whether management’s strategy is disciplined repositioning or a costly gamble that has yet to prove its logic.

• GOVERNMENT REVENUE EROSION IS THE DEFINING RISK

The loss of 10.86 million SAR in government and semi-government sales over nine months is the single largest variable driving Qomel’s earnings deterioration. This is not a cyclical dip that corrects automatically — government procurement decisions reflect budget priorities and contract cycles that can remain unfavorable for extended periods. Until Qomel demonstrates it can fully offset this structural gap through alternative channels, the revenue baseline remains vulnerable.

• PRIVATE-SECTOR PIVOT IS REAL BUT EMBRYONIC

The acceleration of private-sector sales — rising to 2.11 million SAR in Q3 from just 0.48 million SAR a year earlier — confirms that management’s commercial strategy is producing measurable results. However, the absolute scale of this growth remains insufficient to compensate for what has been lost on the government side. Investors should monitor private-sector revenue trajectory closely over the next two quarters as the most critical indicator of strategic execution.

• GROSS MARGIN RECOVERY SIGNALS OPERATIONAL DISCIPLINE

The Q3 gross profit margin of 29.16% — improving both year-on-year and sequentially — indicates that Qomel’s production and procurement efficiency is moving in the right direction. The challenge is that rising selling, marketing, and administrative expenses, partly driven by the private-sector expansion push, are consuming that margin improvement before it reaches shareholders. If operating cost growth stabilizes while gross margins continue to widen, the bottom line could recover more sharply than current sentiment implies.

• BALANCE SHEET STABILITY PROVIDES STRATEGIC RUNWAY

Total shareholders’ equity growing 5.77% year-on-year to 126.80 million SAR, combined with declining finance costs, confirms that Qomel retains meaningful financial headroom to sustain its transformation strategy without immediate liquidity pressure. The clean audit conclusion reinforces balance sheet credibility. This financial stability does not mask the profit decline, but it does mean management has time to execute — a luxury not all small-cap operators enjoy during a strategic transition.

Qomel’s predicament reflects a broader challenge facing Saudi companies built on government contracting as Vision 2030 reshapes public spending priorities and accelerates private-sector development. The Kingdom’s economic transformation is simultaneously disrupting legacy government-dependent revenue models and creating genuine new commercial opportunities in the private economy. Companies that successfully navigate this transition — building diversified, market-driven revenue streams — stand to benefit from a structurally larger and more resilient Saudi economy. Qomel’s ability to convert its current private-sector momentum into meaningful profit recovery will be a test case for how mid-tier Saudi firms adapt to the new economic order.