Saudi Arabia Business Optimism Index – Q1 2010 Presented by Dun & Bradstreet National Commercial Bank.

Saudi Arabia Business Optimism Index – Q1 2010

Presented by Presented by Dun & BradstreetDun & BradstreetNational Commercial Bank National Commercial Bank

• The D&B Business Optimism Index is recognized world over as an

indicator which ascertains the pulse of the business community

• Provides insight into the short-term outlook of business units on

sales, profit growth, investment, etc.

• Provides analysis of major trends, outlook and issues concerning

the business units

Business Optimism Index

• Sample of business units representing Saudi Arabia’s economy

was selected

• 500 business owners and senior executives across business units

were surveyed

• Survey conducted during December 2009 for the 1st quarter of 2010

• Respondents are asked questions about their expectations on

relevant business parameters

• Survey also captures respondent feedback on current business

conditions

Survey

Composite Business Optimism Index

• The Composite Business Optimism Index is calculated separately for the hydrocarbon and non hydrocarbon sector

• Weights are assigned to each of the parameters and the base period is chosen as 2009 to calculate the index

• For the non hydrocarbon sector, the Composite Index captures the aggregate behavior of the six individual parameters

• For the hydrocarbon sector, the Index takes into account the aggregate behavior of the three individual parameters

55.9

53.8

51.6

52.7

56.155.6

55

54.1

49

50

51

52

53

54

55

56

57

US

Japa

n

Euro

zone

Ger

man

y UK

Chi

na

Indi

a

Glo

bal

World Economic Outlook

• Global economic recovery led by emerging markets such as India and China

• US economy expanded while Euro zone & UK posted negative growth, if at a lesser

annual rate of decline

• Global Manufacturing PMI indicates renewed expansion across all major economies

Real GDP Growth Q3 2009 (y/y) Manufacturing PMI December 2009

2.21.3

-4.1-4.8 -5.1

8.97.9

-1.2

-6

-4

-2

0

2

4

6

8

10

US

Japan

Euro

zone

Germ

any

UK

Chin

a

India

Bra

zil

%

Saudi Arabia GDP

• Saudi Arabia’s GDP growth for 2009 is estimated at 0.15%; growth for 2010 is projected at 4%

• The non-oil sector grew at 3% during 2009; aided by government stimulus

• Strong oil prices will provide further growth impetus to the country

Source: Ministry of Finance

Source: OPEC

Sector wise growth 2009

2.23.9

6

2 1.8

0

2

4

6

8

Ind

ustr

ial

Co

nstr

uction

Tra

nspo

rt &

com

munic

atio

ns

Tra

de,

resta

ura

nts

&h

ote

ls

Fin

an

ce

,in

sura

nce &

rea

le

sta

te

%

Crude oil production

8,760

7,964 8,0098,123 8,104 8,126 8,120

7,400

7,600

7,800

8,000

8,200

8,400

8,600

8,800

9,000

Q4 08 Q1 09 Q2 09 Q3 09 Sep-09 Oct-09 Nov-09

'00

0 b

pd

Business Optimism Indices: Q1 2010

• The composite index for the non-hydrocarbon sector is at 144.7, up from 95.6 in the previous quarter

• The composite index for hydrocarbon sector stands at 79.1 as compared to 41.4 in Q409

Hydrocarbon sector

38

10

48

-3

45 48

27

-23

38

-30-20-10

010

2030405060

Level of SellingPrices

Net Profits Number ofEmployees

Q3 09 Q4 09 Q1 10

Non-hydrocarbon sector

4955

42

3022

54 52 51

1929 27

73 76 75

33

5462

-1

-10

0

1020

30

40

5060

70

80

Volume ofSales

NewOrders

Net Profits Level ofSellingPrices

Number ofEmployees

Level ofStock

Q309 Q409 Q110

Business Optimism Indices Trends : Non Hydrocarbon Sector

Volume of Sales

38

12

4954

73

0

10

20

30

40

50

60

70

80

Q1 09 Q2 09 Q309 Q409 Q110

BO

I In

dex

New Orders

38

5552

76

18

0

10

20

30

40

50

60

70

80

Q1 09 Q2 09 Q309 Q409 Q110B

OI I

ndex

Selling Prices

0

-18

-1

33

19

-30

-20

-10

0

10

20

30

40

Q1 09 Q2 09 Q309 Q409 Q110BO

I In

dex

Net Profits

36

12

42

51

75

0

10

20

30

40

50

60

70

80

Q1 09 Q2 09 Q309 Q409 Q110

BO

I In

dex

Number of Employees

40

17

30 29

54

0

10

20

30

40

50

60

Q1 09 Q2 09 Q309 Q409 Q110

BO

I In

dex

Level of Stock

12 10

2227

62

0

10

20

30

40

50

60

70

Q1 09 Q2 09 Q309 Q409 Q110

BO

I In

dex

61 63

-26

59

16 13

68 67

43

69

1913

74 7464

79

60 60

-40

-20

0

20

40

60

80

100

Volume of Sales

New Orders Level of Selling Prices

Net Profits Number of Employees

Level of Stock

Inde

x

Q3 2009 Q4 2009 Q1 2010

Manufacturing Sector

• Global manufacturing activity expands further, December reading at 44-month high

• In Saudi Arabia, the Manufacturing sector has shown further signs of progress with all six parameters registering improvement in Q1 2010

• A full 78% of the firms anticipate a rise in volume of sales

Global Manufacturing Purchasing Managers’ Index

Source: J P Morgan

GDP

12.1%

36.5

33.235.0 35.8

37.3

41.8

45.346.9

50.0

53.1 53.054.4 53.7

55.0

30.0

35.0

40.0

45.0

50.0

55.0

No

v-0

8

De

c-0

8

Jan

-09

Fe

b-0

9

Ma

r-0

9

Ap

r-0

9

Ma

y-0

9

Jun

-09

Jul-

09

Au

g-0

9

Se

p-0

9

Oct

-09

No

v-0

9

De

c-0

9

Manufacturing Sector

44 43

6 10

49

29

48 44

6

36 36

23

77 79

18

76

60

43

0

20

40

60

80

100

Volume of Sales

New Orders Level of Selling Prices

Net Profits Number of Employees

Level of Stock

Ind

ex

Q3 2009 Q4 2009 Q1 2010

2.3

7.1

4.9

3.5 3.22.5

2

-0.5

-1

0

1

2

3

4

5

6

7

8

World Non Japan Asia

Asia Middle East & Africa

South America

Eastern Europe

North America

Western Europe

Source: Global Insight

Construction Sector

• Global construction sector currently driven by infrastructure spending as commercial

property undergoes correction• Construction sector in Saudi Arabia is highly optimistic for Q1 2010; especially for sales

and new orders• A majority (60%) of the construction firms expect to increase their employee count

Residential construction outlook 2008-13Compound annual growth (%) 6.9%

GDPConstruction Sector

6269

1

58

1727

44 43

4

43

26

47

7782

14

77

39

81

0

20

40

60

80

100

Volume of Sales

New Orders Level of Selling Prices

Net Profits Number of Employees

Level of Stock

Ind

ex

Q3 2009 Q4 2009 Q1 2010

Trade & hospitality Sector

• Global trade & hospitality sector is expected to pick up in 2010, but recovery will

be slow as consumers confidence still remains weak

• Saudi Arabia’s retail and wholesale trade, restaurants and hotels sector optimism

improves further with 80% expecting higher sales

• A full 80% of respondents expect to earn higher profits in Q1

GDP

8.3%

Trade, restaurants and hotels

39

60

11

3943

59 59

17

59

35

74 74

22

75

49

0

20

40

60

80

Volume of Sales New Orders Level of Selling Prices

Net Profits Number of Employees

Ind

ex

Q3 2009 Q4 2009 Q1 2010

Transport & Communications Sector

• Global transport & communications sector expected to witness gradual recovery

in 2010

• Business optimism across Saudi Arabia exceptionally high with regards to sales,

orders and profits, indicating robust demand

• More than three fourths of firms in this sector expect sales to pick up in Q1

GDP

6.6%

Transport, Storage & Communications Sector

3745

10

33 33

45 46

15

44

34

6873

32

68

58

0

20

40

60

80

Volume of Sales New Orders Level of Selling Prices

Net Profits Number of Employees

Inde

x

Q3 2009 Q4 2009 Q1 2010

Finance, Insurance, Real Estate & Business Services Sector

• The Global Services PMI recovery has leveled out following extended recovery• Business sentiments in Saudi Arabia’s professional services sector are strong and

improving• Nearly three out of four firms (74%) expect higher sales; similar number expects

higher profits

GDP

12.5%

36.1

39.6

43.0

38.6

41.543.7 43.2

47.4 46.5

50.552.2 53.0

50.352.1

30.0

35.0

40.0

45.0

50.0

55.0

Nov-08

Dec-08

Jan-09

Feb-09

Mar-09

Apr-09

May-09

Jun-09

Jul-09

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

Source: J P Morgan

Global Services Purchasing Managers' Index Finance, Real Estate & Business Services

Business Optimism Indices Trends : Hydrocarbon Sector

26.9%

GDP

49.76

38.6

41.54

41.41

45.78

50.2

55.81 69.56

64.59

71.35

67.17

72.76

76.29

74.01

25

35

45

55

65

75

85

Nov-08

Dec-08

Jan-09

Feb-09

Mar-09

Apr-09

May-09

Jun-09

Jul-09

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

OPEC Monthly Price Basket Level of Selling Prices

48

23

3848 48

-60

-40

-20

0

20

40

60

80

100

Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010

Ind

ex

Net Profits

50

5 10

3827

-60

-40

-20

0

20

40

60

80

100

Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010

Ind

ex

Number of Employees

• Input costs cited as a key concern for many businesses in Saudi Arabia

• 35% of the respondents expect borrowing conditions to improve, only 3% expect a deterioration

• A considerable 46% of the business units plan to invest in business expansion amid initial signs of global economic revival

• 69% of companies in the hydrocarbon sector are facing project delays

Other Key Highlights

Conclusion

• Business outlook in Saudi Arabia has improved significantly since Q4 2009 partly helped by buoyant oil prices

• All five non-hydrocarbon sectors have posted upbeat optimism levels across all six parameters

• 78% of respondents expect higher sales volume in Q1 2010, indicating demand has picked up for Saudi goods and services

• Improving liquidity in the international financial markets has lifted optimism levels in the finance & business services sector

• Strong oil prices drives optimism in the hydrocarbon sector

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