CFO’s Review

2024 Operating Performance

2024 has been a remarkable year for SAL, characterized by significant growth and strategic advancements. The Handling and Logistics divisions both experienced substantial growth within their core operations.

At the beginning of 2024, the Handling business experienced the effects of geopolitical developments and capitalized on these as market opportunities, leading to substantial growth in Q1 air cargo volumes. As the year progressed, the Kingdom’s Vision 2030 initiatives and Saudi Arabia’s expanding role as a global logistics hub further fueled growth. The increase in e-commerce volumes, in particular, contributed greatly to the overall increase of 20% year-over-year growth in air cargo volumes.

The Company’s Logistics division also experienced growth, achieving a 15% organic growth. This was primarily driven by logistics services provided for high-profile events like Riyadh Season, showcasing the Logistics division’s ability to manage complex and large-scale operations.

Overall SAL’s revenues reached SAR 1.63 billion, representing a 12% increase compared to the same period last year. Our cost of sales naturally increased as a direct result of the improved operations, specifically in the Logistics division, where operating margins are lower.

We also entered into the renewal of key long-term rental contracts that allowed us to secure our key facilities and save substantial lease cost. The 20-year lease for King Khaled Airport cargo facilities particularly provided substantial lease savings during the year. Thus, SAL successfully maintained strong profitability through cost efficiencies and rental savings.

The impairment reversal of doubtful debtors decreased at the beginning of the year due to successful recovery efforts in the year and increased again slightly in Q4. Despite adopting a more conservative approach towards receivables impairment during the year, our financial performance remained strong. This cautious stance on impairment reflects our commitment to prudent financial management and risk mitigation.

The two divisions hold very distinct margin profiles. In Handling the main portion of the cost is fixed, so any marginal revenue increase has a significant impact on operating margins, Consequently, the variability of cargo volumes during the year greatly increases the spread. In the Logistics business, on the other hand, margins fluctuate less, as cost variability is greater. However, seasonal project transports and the cost of aged receivable impairment can have a profound impact during the year.

4th Quarter Operating Performance

Q4 2024 was a quarter of resilience and strategic progress for SAL Group, as we navigated a high comparison base from the exceptional market conditions in late 2023, the beginning of the Red Sea situation. In the last quarter of the year, the revenue stood at SAR 408 million, reflecting a 1% year-over-year decline, with Handling at SAR 334 million (-2%) and Logistics at SAR 74 million (+4%), underscoring the continued momentum in our Logistics segment.

Operating profit (EBIT) for the quarter was SAR 155 million, reflecting a 24% year-over-year reduction. During the quarter, our general and administrative expenditure increased as we made strategic investments in internal capabilities. These include the narration of our 2031 strategy, the launch of our traineeship program and IT services, to enhance operational capabilities, drive efficiency and promote innovation.

Additionally, profitability was shaped by a lower utilization and a one-off impairment of aged receivables within the Logistics division.

Despite these short-term effects, SAL maintained a solid operating margin of 38.0% in Q4, with Handling at 46.1% and Logistics at 1.4%. This reflects the evolving nature of our product mix, as we added e-commerce business with limited landside income, which also impacted our performance. The quarter also marked a return to normalized demand levels following the exceptional sea-to-air market conditions in late 2023. The performance in Q4 reflects how we continue to perform well while investing in growth to stay ahead, ensuring we are well-positioned when the impacts of the Red Sea disruption normalize. We enter 2025 with confidence in our ability to capture new opportunities within the Kingdom’s rapidly evolving logistics landscape.

Net income

Notably, our finance income improved significantly, driven by better investment margins, while finance costs decreased due to adjusted rental agreements.

Overall, our profit for the year increased by an impressive 30% compared to the previous year reaching SAR 661 million, underscoring our robust financial performance and strategic execution.

Financial Position

Our financial position remains strong, highlighted by a strategic decrease in non-current assets primarily due to reductions in Right-of-Use Assets for our Dammam and Riyadh Cargo Handling Terminals, as we entered into renewed long term contracts for these leaseholds. This adjustment reflects our commitment to optimizing asset utilization and operational efficiency. The increase in trade receivable reflects our underlying business growth and the successful collection efforts, showcasing our strong market presence and customer relationships.

Non-current liabilities declined in line with the reduction in Right-of-Use Assets, while current liabilities increased as part of our efforts to improve working capital by extending supplier credit terms. These strategic adjustments have strengthened our balance sheet and positioned us well for future growth and operational excellence.

Cash Flow

In FY 2024, the Company delivered strong cash flow performance, with End of Period (EOP) cash increasing to SAR 1,362 million, up from SAR 1,210 million at the Beginning of Period (BOP).

It is important to note that the BOP cash balance includes short-term Murabaha deposits, which represent placements with local banks carrying an original maturity exceeding three months from the investment date. In accordance with accounting standards, these deposits are classified as short-term investments rather than cash equivalents and are therefore excluded from the reported cash and cash equivalents balance at the beginning of the period.

Operating Activities

Net cash generated from operating activities (excluding working capital movements) stood at SAR 815 million, reflecting the Company’s strong earnings quality and enhanced cash conversion capabilities. A key highlight for the year was the decline in non-cash adjustments, underscoring the Company’s improved ability to generate cash from core operations.

Changes in working capital resulted in a SAR 19 million outflow, primarily due to movements in trade receivables and trade payables, reflecting timing differences in customer collections and supplier payments.

Investing Activities

Capital expenditure (CAPEX) investments amounted to SAR 72 million, reinforcing the Company’s commitment to operational enhancements and long-term growth. These investments were aligned with strategic priorities while ensuring disciplined capital allocation.

Our revenue has nearly doubled from SAR 847 million in 2020 to SAR 1.63 billion in 2024, representing a compound annual growth rate (CAGR) of 14%. Net profit has surged from SAR 238 million in 2020 to SAR 661 million in 2024, representing a CAGR of 23%. This impressive growth underscores the effectiveness of our strategic initiatives and unwavering commitment to operational excellence.

EBIT has shown consistent growth during this period, increasing from SAR 312 million in 2020 to SAR 709 million in 2024, while the EBIT margin has improved from 36.8% to 43.4%, underscoring enhanced operational efficiencies. These results highlight SAL’s ability to navigate a competitive landscape while achieving record levels of profitability and operational efficiency. Adjusted free cash flow also reached a record high of SAR 724 million in 2024, a testament to our disciplined financial management, working capital management, and a focus on maximizing shareholder value.

During this period, capital expenditures (CAPEX) were managed, enabling SAL to maintain a strong liquidity position while investing strategically in growth initiatives. Notably, SAL’s robust cash generation has also supported increased dividend payouts, reaching SAR 494 million in 2024.

This remarkable performance was driven by the Company’s strategic focus on operational excellence, innovation, and diversification. Over the past five years, SAL has significantly defended its market share and presence, particularly in high-growth segments such as specialized cargo, courier, and specialized logistics services. Investments in advanced technologies and streamlined processes have further reinforced its position as the National Logistics Champion of Saudi Arabia. Additionally, SAL’s commitment to sustainability and alignment with Vision 2030 have ensured long-term growth and resilience in a rapidly evolving logistics environment.

As we move into 2025 and beyond, SAL’s financial strength, operational resilience, and strategic foresight will continue to drive shareholder value and market leadership. We are confident that our strategic direction and robust financial foundation will enable us to capitalize on emerging opportunities and navigate future challenges, ensuring sustained growth and profitability.