King Fahd University of Petroleum & Minerals

College Of Industrial Management

(FIN302)

Performance Evaluation of Saudi Electricity Company

using financial analyses

Prepared For:
Prof. MOHAMMAD SOHAIL

By:
Ahmad Ali Al-yousef
 Performance Evaluation of Saudi Electricity Company using
financial analyses

Saudi Electricity Co (SE Co.), the second largest power producer

in the Middle East, generates, transmits and distributes

electricity. Its services include electric power transmission,

electric power metering and support services.

In this report we will provide information about the financial

position, performance and changes in financial position of Saudi

Electricity Co. That is useful to a wide range of people in making

economic decisions about SE Co.

We use 4 annual reports of the SE financial statement and

balance sheet to obtain the needed information for evaluating SE

financial position. The reports were collected from Saudi Stock

Exchange (Tadawul) website. Unfortunately, the last reports

released were for 2008. So, we use the reports from 2005 until

2008 to evaluate the company. And use the year of 2005 as a

base year. Also there was a shortage of some information needed

for obtaining the ratio e.g. cost per unit, account receivable.
 SEC Financial Analyses:

Year 2005 2006 2007 2008

liquidity
Current ratio 0.724 0.6754 0.597 0.4807

Inventory turnover ------- 55.153 88.10 158.15

Profitability

Profit margin on 7.9 % 7.71 % 7.4 % 4.95 %

sales
Assets turnover -------- 0.161 0.159 0.158 times
- times times
Return on assets --------- 2.22 % 1.17% 0.78 %
Return on equity --------- ----------- 3.23 2.27
-
Solvency Ratio
Debt to Assets ratio 60.64 62.9 % 64.73 % 66.66%
%
Times Zakat 35.74 ----------- 39.17 ------
earned times times

Financial Analyses:
Current ratio
In 2005, SEC has for every Riyal of current liability; it has 0.724 Riyal of
current assets and this ratio decreased to 0.4807 in 2008, a very low
liquidity ratio.

Inventory turnover
The inventory turnover was increased from 55.153 times in 2005 to 158.15
times in 2008. So, SEC is selling inventory on very will average of number of
times.

Profit margin on sales

A decreased from 7.9 % to 4.95% from 2005 to 2008 in the profit margin
on sales for SEC means a decreased on the percentage of each Riyal of sales
that results in net income.

Assets turnover
We can see that SEC has a decreased in efficiency in using its assets to
generate, the assets turnover was decreased to 0.158 times in 2008.

Return on assets
The overall indicator for profitability, return n assets, show a sharp decline
on the percentage of the profitability, from 2.22% in 2005 to 0.78% on
2008.

Debt to total assets ratio

The percentage of the total assets provided by creditor increased by 6%
from 2005 to 2008.so, the risk that the company may be unable to meet its
maturing obligation has increased.

Times zakat earned

Provide an indication of the company’s ability to meet Zakat payments as
they come due.
And for SEC it’s increased from 35.47 times in 2005, to 39.17 in 2007.

Evaluation of stock price performance in the market:

SEC issued 833.318.763 stocks in a par value of 50 Riyals per stock. In
2007, the Book Value per Share was 11.55 Riyal and increase in 2008 to
reach 11.65. Earning per share was 0.37 Riyal in 2007 and decline to 0.27 in
2008. The price to earning ratio also decrease from 39.58 (2007) to 34.9
(2008), which means investors now are paying less for each unit of net
income, so the stock is less expensive compared to one with higher P/E ratio.
The last market price for SEC stock was 11.95; price\book value in 2007 was
1.03 and in 2008 it decreased to 1.025. Also the dividends were sharply
decline from 2005 until 2008.

Year 2005 2006 2007 2008

Dividends 3.5 0.7 0.7 0.7

Summary and conclusion:

From the previous analyses, we can obvious see that SEC is in deterioration
state. Although it is a monopolistic company, but still increased their losses
year after year. May be it is the time to privatize the SEC to make it more
stable and profitable in the future.

References: from Saudi Stock Exchange (Tadawul) website :

Balance Sheet as 2005/12/31 31/12/2006 31/12/2007 31/12/2008
Current Assets 24,836,375 27,447,287 20,733,312 19,203,834
Inventory 3,654,403 4,695,973 6,587,084 5,806,673
Investments 339,639 748,063 1,659,595 2,159,924
Fixed Assets 75,521,192 80,642,235 102,705,219 118,211,932
Other Assets 13,211,241 13,674,707 4,825,000 0
Total Assets 117,562,850 127,208,265 136,510,210 145,382,363
Current Liabilities 34,282,570 40,635,736 34,675,661 40,148,658
Non-Current Liabilities 22,079,884 24,505,600 38,762,026 41,743,024
Other Liabilities 14,938,060 14,938,060 14,938,060 14,938,060
Shareholder's Equity 46,262,336 47,128,869 48,134,463 48,552,621
Total Liabilities
Shareholder Equity 117,562,850 127,208,265 136,510,210 145,382,363
Last Update Date 05/03/2006 25/02/2007 20/02/2008 25/02/2009
INCOME STATMENT
Statements of Income 2005/12/31 31/12/2006 31/12/2007 31/12/2008
Sales 18,761,289 19,706,657 20,979,452 22,288,742
Sales Cost 11,492,013 12,078,416 13,068,973 21,013,126
Total Income 7,269,276 7,628,241 7,910,479 1,275,616
Other Revenues 266,901 259,258 338,798 340,401
Total Revenues 7,536,177 7,887,499 8,249,277 1,616,017
Admin and Marketing 386,173 408,488 284,173 217,065
Expenses
Depreciation 5,623,944 6,065,179 6,371,536 294,505
Other Expenses 0 0 0 0
Total Expenses 6,010,117 6,473,667 6,655,709 511,570
Net Income Before 1,526,060 1,413,832 1,593,568 1,104,447
Zakat
Zakat 43,018 0 40,677 0
Net Income 1,483,042 1,413,832 1,552,891 1,104,447
Balance First Period 2,681,476 3,467,962 4,192,059 4,915,156
Reserves 148,304 141,383 155,289 110,445
Cash Dividends 547,252 547,252 547,252 547,252
Other Distributions 1,000 1,100 900 800
Balance End Period 3,467,962 4,192,059 5,041,509 5,361,106