Cherry Trading Profit Drops 39% Despite Revenue Surge

Riyadh, Saudi Arabia — Cherry Trading Co. posted a sharp decline in quarterly net profit even as revenue climbed, its nine-month interim results show. Net profit attributable to shareholders fell 39.1% year-on-year to 12.9 million SAR in Q3 2026, down from 21.2 million SAR in Q3 2025. For the nine-month period, net profit dropped 10.7% to 47.6 million SAR from 53.2 million SAR a year earlier. Rising expenses drove both declines, offsetting strong top-line growth across used car sales and fleet leasing.

Revenue Surges, but Margins Compress

Cherry Trading’s total revenue jumped 33.2% year-on-year to 177.0 million SAR in Q3 2026. Used car sales revenue more than doubled, rising 107.8%, while leasing revenue grew 12.8%. Long-term lease revenue increased 10.9% on new contracts, and short-term rental revenue rose 33.7% on new fleet additions and branch openings. Over the nine-month period, revenue reached 494.7 million SAR, up 39.0% from 355.9 million SAR in the same period last year. Used car sales revenue surged 162.1% over the period, and leasing revenue grew 14.0%.

Quarter-on-Quarter Deterioration

Compared to Q2 2026, Cherry Trading’s performance weakened further. Revenue edged up 4.6% to 177.0 million SAR from 169.3 million SAR in the prior quarter. However, net profit fell 20.8% from 16.3 million SAR to 12.9 million SAR. Gross profit dropped 23.3% quarter-on-quarter to 33.7 million SAR, and operating profit fell 10.0% to 29.1 million SAR. The pattern is consistent: Cherry Trading is growing the top line but losing ground at every margin level.

Key Drivers

• Used car sales revenue rose 107.8% year-on-year in Q3 2026 and 162.1% over the nine-month period
• Leasing revenue grew 12.8% in Q3 2026, with long-term leases up 10.9% on new contracts
• Short-term rental revenue increased 33.7%, driven by new fleet and new branch openings
• Higher total expenses eroded profit in both the quarterly and nine-month comparisons
• An expected credit loss (ECL) provision further weighed on nine-month net profit
• Gross profit fell 19.8% year-on-year in Q3 2026 despite the revenue surge, signaling margin pressure
• Total shareholders’ equity grew 8.8% year-on-year to 617.8 million SAR

What This Means for Investors

• Revenue growth is real but not translating to profit — Cherry Trading’s cost structure is expanding faster than its top line
• Earnings per share fell to 1.59 SAR for the nine-month period, down from 1.77 SAR a year earlier, a direct hit to shareholder returns
• The ECL provision signals rising credit risk in the company’s lease or receivables book, worth monitoring in coming quarters
• The external auditor’s report carried an “other matter” paragraph noting a change in auditors from the prior year — investors should review whether this transition affects comparability of reported figures

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THE SAUDI STANDARD’S VIEW: CHERRY TRADING’S MARGIN CRISIS BENEATH THE REVENUE BOOM

Cherry Trading’s latest results present a paradox that Saudi investors cannot afford to misread: a company posting some of the strongest top-line growth on the exchange while simultaneously destroying margin at every level of its income statement. The disconnect between revenue expansion and profit delivery demands disciplined scrutiny, not optimism.

• COST STRUCTURE IS THE CORE PROBLEM

When gross profit falls nearly 20% year-on-year while revenue rises by a third, the business is effectively paying more to generate each riyal of sales than it was a year ago. This is not a temporary anomaly — the same deteriorating pattern held across the nine-month period and worsened sequentially into Q3. Until management demonstrates credible cost discipline, revenue growth figures should carry limited weight in any valuation exercise.

• THE USED CAR EXPANSION CARRIES HIDDEN RISK

Used car sales revenue more than doubling is operationally impressive, but high-volume, lower-margin vehicle transactions can rapidly dilute blended profitability if not carefully priced and managed. The surge in this segment appears to be the primary engine pulling gross margins downward, suggesting Cherry Trading may be sacrificing unit economics to capture market share. Investors should demand clarity on the margin profile of this segment before treating its growth as an unambiguous positive.

• ECL PROVISION FLAGS CREDIT QUALITY CONCERNS

The expected credit loss provision recorded against the nine-month results indicates that Cherry Trading’s receivables or lease book is showing signs of stress. As the company aggressively expands its fleet leasing and short-term rental operations, the quality of counterparties and contract terms becomes a material risk factor. Investors should monitor whether this provision is a one-off recalibration or the beginning of a deteriorating credit trend within the portfolio.

• EQUITY BASE IS SOLID BUT EARNINGS MUST RECOVER

Shareholders’ equity approaching 618 million SAR provides a stable foundation and limits immediate balance sheet concern. However, with earnings per share declining year-on-year and profit compressing both quarterly and over the longer period, the return on that equity base is weakening. A strong equity position buys time, but it does not substitute for a credible path back to earnings growth — and that path remains unclear from current results.

Cherry Trading operates in a sector — automotive retail, fleet leasing, and mobility services — that sits at the intersection of several Vision 2030 priorities, including transportation modernization, private sector development, and the expansion of non-oil economic activity. The demand environment is therefore structurally supportive. But Vision 2030’s ambitions reward companies that can scale efficiently, not those that simply scale. Cherry Trading’s immediate challenge is to prove that its aggressive expansion can be brought under cost control, transforming top-line momentum into the kind of sustainable, margin-accretive growth that long-term investors and the Kingdom’s broader economic transformation both require.