McDonald’s on Monday reported its first quarterly profit failure in just four years due to weak sales expansion in its overseas business division, in part due to the conflict in the Middle East, sending the company’s shares down about 4%.
The burger is among several Western brands that have been the subject of protests and boycott campaigns against it due to its perceived pro-Israel stance in the Israel-Hamas conflict.
McDonald’s said the war had a “significant impact” on the functionality of some markets in the fourth quarter.
Since the company has been hit the hardest hit in the Middle East, the company has also felt an impact on its business in countries such as Malaysia and Indonesia, as well as France, Chief Executive Officer Chris Kempczinski said on a conference call following its results.
“So long as this war is going on … we’re not expecting to see any significant improvement (in these markets).”
Comparable sales in McDonald’s International Development Licensed Markets segment rose 0. 7% in the fourth quarter, above estimates for expansion of 5. 5%, according to LSEG data. The company accounted for 10% of McDonald’s total profits in 2023.
“The effects (of the war) on earnings sustainability would be our biggest concern. . . it looks like it’s a factor that’s going to persist beyond the next quarter, if not both,” said Brian Mulberry, consumer portfolio manager. . at Zacks. Investment Management, which owns shares of McDonald’s.
Starbucks also lowered its full-year sales forecast last week, in part due to a negative effect on sales and traffic at stores in the Middle East.
Consumer spending in China, McDonald’s second-largest market, also remained weak despite the government measures.
While McDonald’s does not provide a breakup of sales in individual international markets, it noted industry-wide promotions picked up in China during the quarter as restaurants rush to revive flagging demand.
McDonald’s U. S. business has also shown signs of weakness, particularly as low-income consumers reduced their order volume or switched to less expensive items.
That translated U. S. comparable sales rose 4. 3% in the quarter, just below estimates for a 4. 4% increase.
McDonald’s, however, reported adjusted earnings consistent with a percentage of $2. 95, beating estimates of $2. 82.
“It’s going to take some time for profits to recover (in the Middle East),” said Joshua Long, an analyst at Stephens, adding that he remains positive about McDonald’s inventory as it is “one of the best-positioned brands. “to navigate a complicated macro environment.
McDonald’s forecasts a 40% operating margin by 2024 and expects to add more than 1,600 dining locations this year. It reported an operating margin of 45. 7% for 2023.
Overall same-store sales rose 3. 4% in the quarter, with no estimates for a 4. 9% increase, which is its weakest sales expansion in about 3 years.
Fitch Ratings on Monday affirmed Saudi Arabia’s Long-Term Foreign Exchange Issuer Default Rating (FDI) at “A” with a Strong Outlook.
The firm said in a report that the score reflects the Kingdom’s strong fiscal and external balances, with public debt-to-GDP and external assets (SNFAs) particularly above the “A” and “AA” medians, and significant fiscal reserves. form of deposits and other public sector assets.
The Agency assumed that net foreign sovereign assets (NFAS) would remain above 50% of GDP in 2024-2025, which is significant for the “A” median (6% of GDP) and the “AA” median (34% of GDP). .
Fitch highlighted that fiscal reforms, which strengthen the resilience of budgets in the face of oil price volatility, could have a positive effect on the rating.
The company forecasts a true 4. 5% expansion in the non-oil sector in 2024-2025, after averaging around 5% in 2022-2023.
Saudi Minister of Industry and Mineral Resources Bandar AlKhorayef told Asharq Al-Awsat that there are direct incentives for the country’s military industries.
These incentives cover loans, industrial purposes, local content in national products, pre-purchase contracts, and other support tools.
AlKhorayef highlighted the ministry’s collaboration with various entities and the General Authority for Military Industries (GAMI) for the Kingdom’s developing military sector.
It revealed efforts to build a business base, focusing on key industries such as iron, aluminum, complex technologies, electronics, and complex chemicals such as plastics.
The minister highlighted joint efforts with the military system, creating opportunities for industries serving both sectors. He showed the availability of express incentives for military industries based on Saudi Arabia’s needs.
AlKhorayef also pointed out that the industrial system provides various incentives to empower investors, including financial support and other facilitative components.
Qatar Energy estimates that the Northern Compartment is home to around 10 of the world’s known plant fuel reserves.
Morocco’s annual industrial deficit of 7. 3% to 286 billion dirhams ($28. 6 billion) in 2023 was helped by a drop in energy imports and a surge in tourism revenues, the currency regulator said in a monthly report.
Imports declined year-on-year by 2. 5% to 715 billion dirhams, while exports rose by 0. 2% to 429 billion dirhams, the regulator said, adding that remittances from Moroccans abroad and exports from the auto industry also contributed to the industry’s deficit.
Morocco’s energy imports dropped 20.4% to 122 billion dirhams after a drop both in demand and prices in the international market.
Wheat imports stood at DH 19. 3 billion, up 25. 3%, while imports of ammonia, key to fertilizer production, fell by 58% to DH 8. 8 billion.
Morocco, which has the world’s largest phosphate reserves, reported a 34% drop in its exports of minerals and derivatives, fertilizers, to 76 billion dirhams.
Morocco, home to Stellantis and Renault production plants, saw exports from the automotive sector increase by more than 27% to a record 141 billion dirhams.
Tourism revenue also reached new highs, jumping 11. 7% to Dh104 billion, from a record Dh14. 5 million in the country last year.
Key to Morocco’s inflow of hard currency, remittances from Moroccans abroad reached a record 115 billion dirhams, up 4% from 2022.
Gulf Air, Bahrain’s national carrier, launched on Saturday its first-ever flight to AlUla International Airport, from where the company will operate direct Bahrain-AlUla flights twice a week, from February 3 to March 6, and from April 10 to April 27, on board Gulf Air A320neo aircraft.
The Royal Commission for AlUla (RCU) is targeting broadening air connectivity with various international and local destinations, and transforming AlUla into a global logistics hub in northwestern Saudi Arabia.
Vice President of RCU’s Office of Marketing and Destination Management, Rami Almoallim, said: “We are pleased to welcome new travellers on their adventure to AlUla, which provides a cultural and tourist experience. “
He added that AlUla’s inclusion among Gulf Air’s most sensible seasonal destinations for the current year is a testament to the tourist appeal of this historic site.
“It also contributes to our efforts to facilitate access to AlUla as a destination for direct foreign flights from nearby foreign air hubs,” he added.
In recent years, several projects have been carried out at AlUla International Airport for its services. The airport joined the list of foreign airports in March 2021. The airport’s total domain has been expanded to nearly 2. 4 million square meters and the airport’s flight deck can accommodate up to 15 aircraft at a time.
The improvement of flight operations and the progression of the airport’s infrastructure align with AlUla’s goals of welcoming two million visitors annually until 2035, a pioneering style of practical and sustainable tourism strategy.
Saudi airlines have expanded the reach of their flights to AlUla International Airport, connecting it to Europe through operational flights to Paris and adding destinations, from Dubai, Doha and Cairo.
The Egyptian Suez Canal Authority reported that January 2024 profits saw a large drop of 46% from the same period in 2023, from $804 million to $428 million.
The authority’s chairman, Osama Rabie, said in televised remarks that 1,362 ships passed through the canal in January 2024, up from 2,155 ships in January 2023, a low of 36%.
Rabie noted that this is the first time the Suez Canal has gone through a crisis, adding that the Authority has held meetings with shipping agencies and companies to find a solution.
He said this resulted in a consensus that the Suez Canal direction is the best, shortest and safest maritime direction and that the Cape of Good Hope is an unsustainable navigation direction.
Rabie pointed out that ships are being delayed between 12 and 15 days, depending on the speed of the vessel and weather conditions, as a result of taking routes alternative to the Red Sea and the Suez Canal, thus disrupting global supply chains.
The official said the Suez Canal challenge affects the whole world, only Egypt.
He expected traffic through the Canal to increase rapidly after the current crisis is over to compensate for supply chains.
The International Monetary Fund (IMF) recently warned of escalating tensions in the Red Sea region and its effects on industry and shipping costs.
The Fund said in a report adding an update on the regional economic outlook in the Middle East and North Africa (MENA) that after ships arrived under drone strikes in the Red Sea and Gulf of Aden, many large shipping companies moved their shipments. other shipping routes, with potential implications for global supply chains and commodity trade, as well as higher insurance costs.
He warned that shipping costs could rise if tensions persist after some shipping companies moved more of their industry to longer choice routes, driving up fuel and operating costs.