Amwaj International Posts 34.6% Net Profit Drop

Riyadh, Saudi Arabia — Amwaj International Co. reported net profit of 2.29 million SAR for the first half of 2026, down 34.6% from 3.50 million SAR in the same period a year earlier. Revenue fell sharply to 101.21 million SAR from 160.62 million SAR — a 37% decline driven by lower branch and online sales. Despite the drop, operating profit rose 4.89% to 8.84 million SAR, and gross margins improved meaningfully.

Revenue and Profit Breakdown

Branch sales fell by 59.03 million SAR, and online sales dropped a further 0.38 million SAR. Yet Amwaj International’s gross profit margin expanded to 19.66% from 14.54% a year ago — a clear sign that cost discipline is working even as the top line shrinks. Operating profit climbed to 8.84 million SAR from 8.43 million SAR, reflecting a combined 3.86 million SAR reduction in selling, marketing, general, administrative, and expected credit loss expenses. However, finance costs rose by 2.03 million SAR and other income fell by 0.22 million SAR, pulling net profit lower despite the operating improvement. Earnings per share dropped to 0.38 SAR from 0.58 SAR.

Key Drivers

• Revenue declined 37% to 101.21 million SAR, led by a 59.03 million SAR drop in branch sales
• Gross profit margin improved to 19.66% from 14.54%, showing stronger cost control
• Finance costs rose 2.03 million SAR, the primary drag on net profit
• Operating expenses fell 3.86 million SAR in total, supporting operating profit growth
• Zakat expense declined 0.63 million SAR, partially cushioning the net profit drop
• Operating cash flow strengthened to 21.39 million SAR from 19.68 million SAR
• Cash and equivalents surged to 16.31 million SAR from 2.78 million SAR at year-end 2025

Balance Sheet and Accumulated Losses

Amwaj International carried accumulated losses of 25.73 million SAR as of 30 June 2026, representing 42.88% of share capital. That compares to 28.02 million SAR, or 46.69% of share capital, at the end of 2025. The first-half profit reduced those losses by 2.29 million SAR. Total shareholders’ equity rose to 44.97 million SAR from 42.68 million SAR at year-end 2025. However, equity remains sharply lower than the 133.96 million SAR recorded in the comparable prior-year period, reflecting a 66.4% decline year-on-year.

What This Means for Investors

• Revenue is shrinking fast — down 37% — but margin improvement signals management is tightening operations effectively
• Rising finance costs are a persistent headwind; investors should watch debt levels closely in the second half
• Accumulated losses remain elevated at 42.88% of share capital, which limits financial flexibility and warrants caution
• The cash position has improved substantially — from 2.78 million SAR to 16.31 million SAR — providing a short-term liquidity buffer

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THE SAUDI STANDARD’S VIEW: AMWAJ INTERNATIONAL’S MARGIN RECOVERY CANNOT MASK STRUCTURAL REVENUE RISK

Amwaj International’s first-half 2026 results present a genuinely mixed picture for investors: operational discipline is delivering real improvements at the cost and margin level, yet a 37% revenue contraction raises serious questions about the company’s commercial trajectory. The divergence between a strengthening operating line and a weakening net profit figure demands careful interpretation rather than a binary read of the headline numbers.

• MARGIN EXPANSION IS REAL, BUT CONTEXT IS CRITICAL

Gross profit margin rising from 14.54% to 19.66% on a dramatically smaller revenue base reflects genuine cost discipline by management. However, investors should recognize that margin improvement achieved through revenue compression is a fundamentally different — and less sustainable — achievement than margin expansion driven by pricing power or operational scale. The quality of this improvement must be scrutinized in the context of continued top-line deterioration.

• FINANCE COSTS ARE THE DECISIVE VARIABLE

The 2.03 million SAR rise in finance costs is the single most consequential factor separating a healthy operating performance from a disappointing net profit outcome. Until the company demonstrably reduces its debt servicing burden, the operating improvements management has worked to achieve will continue to be diluted at the bottom line. Investors should treat debt structure and financing terms as a primary monitoring metric in the second half of 2026.

• ACCUMULATED LOSSES SIGNAL CONSTRAINED STRATEGIC OPTIONS

With accumulated losses at 42.88% of share capital, Amwaj International faces meaningful restrictions on financial flexibility — limiting its capacity to pursue growth investment, distribution to shareholders, or balance sheet restructuring without careful regulatory and governance consideration. The year-on-year decline in shareholders’ equity of over 66% reflects a balance sheet that remains under significant pressure despite incremental first-half improvement. Recovery from this position will require sustained profitability over multiple reporting periods, not a single quarter of operational progress.

• CASH POSITION PROVIDES A TACTICAL CUSHION

The near sixfold increase in cash and equivalents — rising to 16.31 million SAR — is a meaningful development that provides the company with short-term operational resilience and the capacity to manage near-term obligations without acute liquidity stress. Strong operating cash flow generation of 21.39 million SAR further validates that the core business, even at reduced revenue levels, is converting earnings to cash effectively. This liquidity improvement is one of the more constructive signals in the results for patient investors.

For a Saudi economy actively diversifying its retail, consumer, and services sectors under Vision 2030, companies like Amwaj International represent the transformation challenge in microcosm: the ability to rationalize cost structures and improve operational efficiency while simultaneously rebuilding revenue growth. The Kingdom’s ambition to develop a deep, mature capital market requires listed companies to demonstrate not just short-term margin management, but credible pathways to sustainable top-line recovery. Amwaj International’s next two reporting periods will be decisive in determining whether its current operational discipline is the foundation of a genuine turnaround or simply a holding pattern ahead of further structural adjustment.