Almarai's writeoff of losses from the drop in the market value of Zain Saudi Arabia has been hailed as a professionally sound move. Financial analyst Salman Al-Hawawi says it comes at the right time as the volume of these losses is estimated at SR135.7 million. "Almarai's decision to delete the losses if Zain Saudi Arabia continues to incur losses represents a prudent financial philosophy," he said. The decision is a good long-term strategy for shareholders considering the poor transparency of Zain. Almarai is Saudi Arabia's largest dairy company by market value, operating dairy farms and processing juices. Almarai made its investment in Zain telecommunications network based on solid accountancy criteria and its market value in the third quarter. The unrealized losses from the drop in the investment value by the end of the third quarter reached SR135.7 million, out of an original investment value of SR350 million - equivalent to 35 million shares representing 2.5 percent of Zain Saudi Arabia's capital. Al-Hawawi says "the current situation Zain is passing through does not show any signs of improvement and will not, until at least by the end of this year, despite the company's restructuring plans." He said Almarai's decision means "Zain would record exceptional losses. Therefore, the measure removes a financial burden off the company's lists during the future financial periods." Zain has faced financial difficulties since its establishment. The founding shareholders, including Almarai, refinanced its loans by mortgaging their shares to pay off the creditors until July 2012. They also extended the repayment period of the loans provided by the company's founders. Almarai had provided Zain with loans reaching a value of SR109.6 million. Zain shares are currently being traded at levels lower than their nominal value at just SR5.95 per share. However, Almarai registered 1 percent increase in profit in the first nine month of this year at SR1.014 billion against the same period last year. – SG/Al
