MESC Profit Dips 4.4% as Margins Compress

Riyadh, Saudi Arabia — Middle East Specialized Cables Co. (MESC) posted a net profit of 19.41 million SAR for the third quarter of fiscal 2026, down 4.4% from 20.31 million SAR in the same quarter a year earlier. Despite a 55.6% surge in revenue, rising copper prices, supply chain disruptions, and higher financing costs squeezed margins and eroded bottom-line gains.

For the nine-month period ending September 30, 2026, net profit rose 21.4% to 84.25 million SAR, compared to 69.41 million SAR in the same period last year. Revenue for the nine months climbed 41.8% to 1,560.28 million SAR. Earnings per share reached 2.11 SAR, up from 1.74 SAR a year earlier.

Quarterly and Period Breakdown

Third-quarter revenue jumped to 592.18 million SAR from 380.52 million SAR a year ago, a gain of 55.6%. Sequentially, revenue rose 17.1% from 505.63 million SAR in the prior quarter, driven by stronger demand for low-voltage power cables. However, quarterly net profit fell sharply — down 39.8% from 32.26 million SAR in Q2 — as gross margin contracted to 11.3% from 15.1% the previous quarter.

Operational profit for the quarter came in at 33.09 million SAR, up 13.5% year over year but down 20% from Q2’s 41.34 million SAR. Total comprehensive income attributable to shareholders reached 28.27 million SAR for the quarter, up 42.5% from the same quarter last year. Shareholders’ equity grew 14.6% year over year to 594.13 million SAR.

Key Drivers

• Revenue surge, margin squeeze: Higher copper prices boosted revenue significantly, but also raised input costs on orders priced before supply chain disruptions hit, compressing gross margin to 11.3% in Q3 from 14.8% a year ago.
• Volume growth across all cable types: Both Saudi Arabia and UAE markets contributed higher sales volumes in tons during the nine-month period and the third quarter.
• Financing costs spike: Financing costs rose 68% year over year in Q3 and 32.6% from Q2, as higher copper volumes and prices directly inflated raw material financing expenses.
• Selling and marketing expenses up 64.7%: Higher volumes drove increased shipping, transportation, and incentive costs in Q3 versus the same quarter last year.
• Zakat and tax pressure: Zakat and income tax rose 121.4% from Q2, partly because the prior quarter benefited from a 1.5 million SAR zakat provision reversal following final assessments for prior years.
• Sales mix shift: A heavier weighting toward lower-margin power cables in Q3 pressured overall profitability relative to Q2.

What This Means for Investors

• Revenue growth masks margin erosion: MESC grew its top line impressively, but supply chain disruptions and copper price volatility are compressing margins in ways that revenue headlines do not capture.
• Nine-month profit trend is positive: Despite the weak Q3, the 21.4% year-over-year net profit gain for the nine-month period shows the business is growing profitably over time.
• Financing cost trajectory is a risk: As long as copper prices remain elevated, financing costs will continue to rise — limiting how much of the revenue increase converts to profit.
• EPS improvement signals underlying value: Earnings per share of 2.11 SAR versus 1.74 SAR a year ago represents a meaningful gain for shareholders on a nine-month basis, even with Q3 weakness.

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THE SAUDI STANDARD’S VIEW: MESC’S MARGIN SQUEEZE REVEALS THE COST OF RAPID GROWTH

Middle East Specialized Cables Co. presents a study in contrasts: a company generating exceptional top-line momentum while watching bottom-line gains erode under the weight of commodity price volatility and rising financing costs. For Saudi investors, the story is not simply about a profit dip — it is about the structural discipline required to convert infrastructure demand into durable shareholder value.

• COPPER EXPOSURE IS A DOUBLE-EDGED SWORD

Elevated copper prices inflate MESC’s revenue figures while simultaneously crushing the margins on contracts priced before cost pressures materialized. This mismatch between contract pricing and input cost timing is a structural vulnerability that investors in commodity-linked manufacturers must weigh carefully. Until MESC demonstrates stronger pass-through mechanisms or hedging discipline, copper price movements will continue to dictate profitability in ways that revenue growth cannot mask.

• FINANCING COSTS SIGNAL BALANCE SHEET STRESS AT SCALE

A 68% year-over-year surge in quarterly financing costs reflects more than seasonal inventory buildup — it signals that MESC’s working capital requirements are expanding faster than its ability to self-fund growth. As higher copper volumes demand greater raw material financing, the company’s cost of growth is rising in tandem with its revenues. Investors should monitor whether improving margins in future quarters can outpace this financing burden before it structurally constrains profitability.

• NINE-MONTH TRAJECTORY PROVIDES STRATEGIC REASSURANCE

Isolating Q3 weakness risks obscuring the more meaningful picture: a 21.4% net profit gain and a 41.8% revenue increase over nine months represent genuine commercial traction across Saudi and UAE markets. Shareholders’ equity growth of 14.6% year-over-year further confirms that value is accumulating within the business even as quarterly volatility creates noise. Long-term investors should weight the nine-month trend as the more reliable indicator of MESC’s fundamental direction.

• SALES MIX MANAGEMENT WILL DETERMINE MARGIN RECOVERY

The shift toward lower-margin power cables in Q3 is a strategic signal as much as an accounting outcome — volume growth achieved at the cost of mix quality undermines the efficiency of capital deployed. For MESC to restore gross margins toward the 15% range demonstrated in Q2, management must pursue a more deliberate balance between volume targets and product-level profitability. Investors should look for evidence of this discipline in forthcoming quarterly disclosures before treating margin recovery as assured.

MESC operates at the intersection of two of Vision 2030’s most critical imperatives: the electrification of Saudi Arabia’s expanding infrastructure and the development of a competitive domestic industrial base. The company’s revenue growth reflects genuine demand from gigaprojects and urban development programs that are reshaping the Kingdom’s physical landscape. However, sustainable participation in this transformation requires that MESC strengthen its cost management and pricing architecture — because Vision 2030’s industrial ambitions will ultimately reward manufacturers that build profitability alongside capacity, not those that sacrifice one for the other.