Bawan Co.’s CEO Zeyad Al-Barrak
Bawan Co.’s CEO Zeyad Al-Barrak said that the oil and gas segment has become a key growth driver for the group following the acquisition of Petronash, contributing more than 80% of the combined operating profit of industrial segments and about 41% of consolidated revenues during Q1 2026, amid continued project execution as scheduled. 
He told Argaam that Bawan is very optimistic about Petronash’s underlying demand drivers, the near-term operating environment carries a degree of uncertainty that cannot be fully quantified at this stage.
According to the top executive, the group continues to focus on strengthening the resilience of its business through sector diversification and improving operational efficiency, despite ongoing challenges related to geopolitical tensions, rising freight costs, and delays in certain supplies. He emphasized that the company is continuously monitoring logistical developments and supply chains to mitigate their impact on operations.
Al-Barrak also pointed out that Bawan is entering Q2-2026 with a healthy order book and continued momentum from the operational improvements reflected in Q1 results. He noted that, at the same time, the group refrains from offering specific guidance on Q2 performance at this stage, as the environment in which the group operates has a number of variables that remain genuinely fluid, particularly the regional geopolitical situation and its knock-on effects on supply chains, logistics and broader market sentiment.
He confirmed that the company’s strategy is proceeding according to plan, that its segments remain in strong competitive positions within their markets, adding that the group’s structural profitability has seen a noticeable improvement.
Below is the detailed interview:
1- Bawan Co.’s net profit decreased by 65% during the first quarter of 2026, despite growth in revenues and operating profit. What is your comment on these results? To what extent is the decline primarily due to the absence of the non-recurring acquisition gains recorded in the same quarter of the previous year?
The reported year-on-year movement looks dramatic on the surface, but it does not reflect the actual operating performance of the business. To understand what really happened, you need to look at the composition of each comparable.
Q1-2025 reported net profit included a one-time, non-cash bargain purchase gain of SAR 126 million recognized on the acquisition of our subsidiary in Oil Gas Sector. The comparatives have also now been revised to reflect the finalized Purchase Price Allocation (PPA) for fair comparison as per equirements of International Financial Reporting Standards (IFRSs), which includes noncash amortization charges on the intangible assets identified during the acquisition. Once you strip out these non-cash items, Bawan’s underlying effective net profit for Q1-2025 was approximately SAR 37 million.
For Q1-2026, our reported net profit is SAR 52 million, which already absorbs SAR 34 million of non-cash PPA amortization (Bawan’s share). Adding that back, the underlying effective net profit for the quarter is SAR 86 million.
So on a like-for -like operational basis, our effective net profit has more than doubled year-on-year, from SAR 37 million in Q1-2025 to SAR 86 million during Q1-2026. That is the number that reflects how the business actually performed during the quarter.
To address the second part of your question directly, yes, the optical decline is largely explained by the absence of the one-time non-cash bargain purchase gain in last year’s comparable, combined with the non-cash PPA amortization now flowing through the income statement. Neither item has any bearing on cash generation, the underlying earnings capacity of our segments, or the economics of the acquisition itself.
We understand that the reported number may create some noise, particularly while the PPA amortization continues to weigh on the income statement. But the underlying picture is clear: revenues grew by 13%, effective gross margin expanded from 13% to 19%, effective operating income increased from SAR 64 million to SAR 120 million, EBITDA grew from SAR 86 million to SAR 147 million, and our diversified portfolio is delivering on the strategy we set out.
2- The oil and gas sector achieved strong growth during the quarter. What is the sector’s current contribution to the group’s revenues and profitability? How do you assess Petronash’s performance after the acquisition?
The Oil Gas segment, through Petronash, has become a meaningful pillar of the group’s earnings profile. In Q1-2026, the segment contributed approximately 41% of Bawan’s consolidated revenue, and more than 80% of the combined operating profit generated by our industrial segments.
On Petronash’s performance specifically, the business has been consistently growing and is tracking in line with the expectations we set out at the time of the acquisition. Execution on existing projects has been disciplined, completion rates have progressed well and the contribution to the Group’s earnings capacity is materializing as planned. From an integration standpoint, the transition has gone smoothly and the segment is operating with the operational rhythm we had anticipated.
That being said, we want to be measured in how we frame the outlook. The current geopolitical environment in the region is becoming increasingly volatile and is creating real supply chain disruption across the GCC. While we are very optimistic about Petronash’s underlying demand drivers, the near-term operating environment carries a degree of uncertainty that we cannot fully quantify at this stage. Logistics, freight and the timing of certain inputs are areas we are watching closely and the situation remains fluid.
So the short answer is, Petronash is performing well and is delivering on the thesis. But we are equally mindful that the external environment introduces variables outside of our control, and the durability of the current pace will depend in part on how the regional situation evolves over the coming quarters.
3- The company indicated the recording of depreciation and amortization expenses related to the purchase price allocation (PPA). How long will this accounting effect continue? How do you view the actual operating profitability after excluding these non-cash items?
The PPA-related amortization weighing on our reported numbers comes predominantly from one specific intangible, the contract backlog we recognized at the time of the Petronash acquisition. This is a finite-life asset tied to the contractual revenue backlog at acquisition date, and it amortizes as those contracts are delivered.
We are well advanced through this cycle. Approximately 72% (SAR 130 million) of the contract backlog intangible has already been amortized (53% in FY 2025 and 19% in Q1-2026), and we expect the remainder to be fully amortized during the course of 2026. Beyond that, residual amortization on other identified intangibles will continue for a few years, but at a materially smaller magnitude that tapers off based on each asset’s useful life. The heavy lifting is largely behind us, with 2026 being the last year this could have a noticeable impact on reported earnings.
On underlying profitability, our reported Q1-2026 net profit of SAR 52 million absorbs SAR 42 million of PPA amortization at the group level (Bawan’s share: SAR 34 million). Isolating these noncash items, our effective net profit stands at SAR 86 million. This is the number that reflects the genuine economics of our segments, and the figure we use internally to assess group performance. As the amortization tapers from 2027 onwards, the gap between reported and effective earnings will narrow significantly, allowing our reported margins to better reflect the underlying strength of the operations.
4- Financing costs increased as a result of the debt incurred from the oil and gas acquisition. What is the current debt level?
At the group level, our debt position is structured across two main components. We have a term loan of SAR 513 million, out of which SR 358 million relates to the loan obtained to support the Petronash acquisition, with the remainder forming part of normal funding for our ongoing CAPEX requirements. Our short-term loans stand at SAR 840 million, which is primarily driven by ongoing operations and working capital needs, particularly in the Oil Gas segment.
It’s worth providing some context on the short-term debt, because the absolute number can look elevated at first glance. Oil Gas sector operates a contracting business model where working capital funding is integral to executing customer orders, project mobilization, procurement of long-lead items and progress through delivery milestones. This is a structural feature of the business itself, not a sign of financial stress.
Our overall liquidity position at the group level remains stable. Having said that, we are focused on improving the balance sheet further over time, both by settling down loans as cash generation allows and by managing our overall leverage more efficiently. Protecting shareholder wealth over the long term is a core priority and disciplined capital structure management is a key part of how we get there.
5- The electrical and wood industries sectors experienced pressure on sales and margins. How do you assess the current demand levels in these sectors? Are there any indications of improvement during the second quarter?
Both the Electrical and Wood segments experienced some softness during Q1-2026 and we want to be transparent about that. In Electrical, we saw a moderation in sales, which weighed on the segment’s gross margin. In Wood, the dynamics were similar, with lower volumes and pricing pressure in certain product categories impacting profitability. In addition, the Wood business has been navigating through a more challenging logistical environment given the current geopolitical situation, with longer lead times and higher freight costs on certain inbound flows and this has added pressure on the segment beyond pure market dynamics.
It is also important to keep this in perspective. The Electrical segment operates in markets that are inherently cyclical and sensitive to project timing, customer phasing, and broader market conditions, with Q1 typically reflecting the slower pace of activity during the early part of the year.
We have navigated similar phases before and our approach remains focused on margin discipline, higher-value product lines and operational efficiency rather than chasing volume. The underlying fundamentals continue to be supportive over the medium term, with the Kingdom’s ongoing investment in housing, urban development, infrastructure and the electrification needs tied to Vision 2030, while newer opportunities such as our entry into modular data center solutions and the expansion of our medium-voltage offering gradually broaden our addressable market beyond traditional transformer and switchgear demand.
On whether Q2 will show improvement, we are not in a position to make a definitive call at this stage. Early indicators are mixed and the current geopolitical and logistical environment adds a layer of uncertainty that makes near-term forecasting more difficult than usual. What we can say is that we are actively working to recover momentum in both segments and that the broader group is now sufficiently diversified that softness in one or two segments can be absorbed by strength elsewhere, as Q1 itself demonstrated. That portfolio resilience is one of the key outcomes of the strategy we have been executing and it is what gives us confidence in the group’s trajectory even when individual segments face temporary turbulences.
6- The metals sector has seen improved profitability following a rise in average product prices. Do you expect margins and prices to continue improving in the coming period?
The improvement in the metals sector during Q1-2026 reflects both a recovery in average selling prices and the operational discipline we have maintained through a softer period. That being said, metal pricing is fundamentally driven by global and regional commodity dynamics that are largely outside our control and we would be cautious against extrapolating any single quarter’s trend forward. We are optimistic that the current momentum continues, supported by a healthy demand backdrop from Vision 2030 projects and infrastructure activity, but our focus remains on managing the business with cost discipline and product mix focus so that we are well positioned to capture upside when conditions are favorable and protect profitability when they are not.
7- How do you view the impact of current geopolitical tensions on supply and demand chains, particularly in the oil and gas and industrial products sectors?
We want to be straightforward on this point. The current geopolitical situation in the region remains volatile and it would be unrealistic to suggest that any industrial business operating in the GCC is fully insulated from it. Supply chains and global oil price dynamics ultimately affect every operator, directly or indirectly and Bawan is not an exception.
On the supply side, we continue to experience the kind of logistical challenges we flagged previously, including higher freight costs, shipping delays, longer lead times on certain inbound flows and in some cases force majeure declarations on specific deliveries. We have taken precautionary steps on parts of our foreign procurement and are actively working with our suppliers and logistics partners to mitigate impact and reroute where necessary. These are industry-wide dynamics rather than issues unique to Bawan, but they are real, and they require active day-to-day management.
In terms of segment exposure, the picture is differentiated. The vast majority of our legacy industrial operations, Metal Wood, Plastics and Electrical, primarily serve the domestic market. While this gives us a degree of insulation on the demand side, these segments are not immune to the broader environment. These segments (particularly Wood and Electrical) still carry inbound supply chain dependencies where logistical disruption, longer lead times and higher freight costs can flow through to operations and we are actively monitoring these pressures. The Oil Gas segment, given the nature of its business and customer base, has a more direct sensitivity to regional dynamics and we are watching that closely.
The honest position is this. We are managing through the current environment with the tools available to us, including pricing flexibility, inventory cover and active supply chain management. But the situation remains fluid and its full impact on the broader business environment is difficult to predict at this stage. We would rather flag this exposure transparently than understate or overstate it, because the reality is that majority of industrial operator in the region are not fully immune to how the regional situation evolves from here.
8- What are your expectations for the group’s performance during Q2 2026?
We are entering Q2-2026 with a healthy order book and continued momentum from the operational improvements reflected in our Q1 results. The fundamentals supporting our business remain intact and the diversification of our portfolio across Oil Gas, Electrical, Plastics and Metal Wood continues to provide the Group with a degree of resilience that has served us well through different market cycles.
At the same time, we would respectfully refrain from offering specific guidance on Q2 performance at this stage. We operate in an environment where a number of variables remain genuinely fluid, particularly the regional geopolitical situation and its knock-on effects on supply chains, logistics and broader market sentiment. The pace at which these dynamics evolve and the way they ultimately translate into operating conditions on the ground, is difficult to assess with any precision at this point. In our view, providing forward expectations in such a setting would not do justice to the underlying uncertainty.
What we are comfortable saying is that our strategy is on track, our segments remain well positioned within their respective markets and the structural earnings capacity of the group has been meaningfully enhanced by the investments and additions of the past period. Our focus continues to be on executing well, managing the variables within our control with discipline, and navigating those outside of our control as thoughtfully as we can. The shape of Q2 will inevitably reflect how the broader environment unfolds. Our focus remains on the medium-term trajectory of the group, while staying realistic about the near-term variables that are outside of our control.
Bawan Co.’s CEO Zeyad Al-Barrak
Bawan Co.’s CEO Zeyad Al-Barrak said that the oil and gas segment has become a key growth driver for the group following the acquisition of Petronash, contributing more than 80% of the combined operating profit of industrial segments and about 41% of consolidated revenues during Q1 2026, amid continued project execution as scheduled.
He told Argaam that Bawan is very optimistic about Petronash’s underlying demand drivers, the near-term operating environment carries a degree of uncertainty that cannot be fully quantified at this stage.
According to the top executive, the group continues to focus on strengthening the resilience of its business through sector diversification and improving operational efficiency, despite ongoing challenges related to geopolitical tensions, rising freight costs, and delays in certain supplies. He emphasized that the company is continuously monitoring logistical developments and supply chains to mitigate their impact on operations.
Al-Barrak also pointed out that Bawan is entering Q2-2026 with a healthy order book and continued momentum from the operational improvements reflected in Q1 results. He noted that, at the same time, the group refrains from offering specific guidance on Q2 performance at this stage, as the environment in which the group operates has a number of variables that remain genuinely fluid, particularly the regional geopolitical situation and its knock-on effects on supply chains, logistics and broader market sentiment.
He confirmed that the company’s strategy is proceeding according to plan, that its segments remain in strong competitive positions within their markets, adding that the group’s structural profitability has seen a noticeable improvement.
Below is the detailed interview:
1- Bawan Co.’s net profit decreased by 65% during the first quarter of 2026, despite growth in revenues and operating profit. What is your comment on these results? To what extent is the decline primarily due to the absence of the non-recurring acquisition gains recorded in the same quarter of the previous year?
The reported year-on-year movement looks dramatic on the surface, but it does not reflect the actual operating performance of the business. To understand what really happened, you need to look at the composition of each comparable.
Q1-2025 reported net profit included a one-time, non-cash bargain purchase gain of SAR 126 million recognized on the acquisition of our subsidiary in Oil Gas Sector. The comparatives have also now been revised to reflect the finalized Purchase Price Allocation (PPA) for fair comparison as per equirements of International Financial Reporting Standards (IFRSs), which includes noncash amortization charges on the intangible assets identified during the acquisition. Once you strip out these non-cash items, Bawan’s underlying effective net profit for Q1-2025 was approximately SAR 37 million.
For Q1-2026, our reported net profit is SAR 52 million, which already absorbs SAR 34 million of non-cash PPA amortization (Bawan’s share). Adding that back, the underlying effective net profit for the quarter is SAR 86 million.
So on a like-for -like operational basis, our effective net profit has more than doubled year-on-year, from SAR 37 million in Q1-2025 to SAR 86 million during Q1-2026. That is the number that reflects how the business actually performed during the quarter.
To address the second part of your question directly, yes, the optical decline is largely explained by the absence of the one-time non-cash bargain purchase gain in last year’s comparable, combined with the non-cash PPA amortization now flowing through the income statement. Neither item has any bearing on cash generation, the underlying earnings capacity of our segments, or the economics of the acquisition itself.
We understand that the reported number may create some noise, particularly while the PPA amortization continues to weigh on the income statement. But the underlying picture is clear: revenues grew by 13%, effective gross margin expanded from 13% to 19%, effective operating income increased from SAR 64 million to SAR 120 million, EBITDA grew from SAR 86 million to SAR 147 million, and our diversified portfolio is delivering on the strategy we set out.
2- The oil and gas sector achieved strong growth during the quarter. What is the sector’s current contribution to the group’s revenues and profitability? How do you assess Petronash’s performance after the acquisition?
The Oil Gas segment, through Petronash, has become a meaningful pillar of the group’s earnings profile. In Q1-2026, the segment contributed approximately 41% of Bawan’s consolidated revenue, and more than 80% of the combined operating profit generated by our industrial segments.
On Petronash’s performance specifically, the business has been consistently growing and is tracking in line with the expectations we set out at the time of the acquisition. Execution on existing projects has been disciplined, completion rates have progressed well and the contribution to the Group’s earnings capacity is materializing as planned. From an integration standpoint, the transition has gone smoothly and the segment is operating with the operational rhythm we had anticipated.
That being said, we want to be measured in how we frame the outlook. The current geopolitical environment in the region is becoming increasingly volatile and is creating real supply chain disruption across the GCC. While we are very optimistic about Petronash’s underlying demand drivers, the near-term operating environment carries a degree of uncertainty that we cannot fully quantify at this stage. Logistics, freight and the timing of certain inputs are areas we are watching closely and the situation remains fluid.
So the short answer is, Petronash is performing well and is delivering on the thesis. But we are equally mindful that the external environment introduces variables outside of our control, and the durability of the current pace will depend in part on how the regional situation evolves over the coming quarters.
3- The company indicated the recording of depreciation and amortization expenses related to the purchase price allocation (PPA). How long will this accounting effect continue? How do you view the actual operating profitability after excluding these non-cash items?
The PPA-related amortization weighing on our reported numbers comes predominantly from one specific intangible, the contract backlog we recognized at the time of the Petronash acquisition. This is a finite-life asset tied to the contractual revenue backlog at acquisition date, and it amortizes as those contracts are delivered.
We are well advanced through this cycle. Approximately 72% (SAR 130 million) of the contract backlog intangible has already been amortized (53% in FY 2025 and 19% in Q1-2026), and we expect the remainder to be fully amortized during the course of 2026. Beyond that, residual amortization on other identified intangibles will continue for a few years, but at a materially smaller magnitude that tapers off based on each asset’s useful life. The heavy lifting is largely behind us, with 2026 being the last year this could have a noticeable impact on reported earnings.
On underlying profitability, our reported Q1-2026 net profit of SAR 52 million absorbs SAR 42 million of PPA amortization at the group level (Bawan’s share: SAR 34 million). Isolating these noncash items, our effective net profit stands at SAR 86 million. This is the number that reflects the genuine economics of our segments, and the figure we use internally to assess group performance. As the amortization tapers from 2027 onwards, the gap between reported and effective earnings will narrow significantly, allowing our reported margins to better reflect the underlying strength of the operations.
4- Financing costs increased as a result of the debt incurred from the oil and gas acquisition. What is the current debt level?
At the group level, our debt position is structured across two main components. We have a term loan of SAR 513 million, out of which SR 358 million relates to the loan obtained to support the Petronash acquisition, with the remainder forming part of normal funding for our ongoing CAPEX requirements. Our short-term loans stand at SAR 840 million, which is primarily driven by ongoing operations and working capital needs, particularly in the Oil Gas segment.
It’s worth providing some context on the short-term debt, because the absolute number can look elevated at first glance. Oil Gas sector operates a contracting business model where working capital funding is integral to executing customer orders, project mobilization, procurement of long-lead items and progress through delivery milestones. This is a structural feature of the business itself, not a sign of financial stress.
Our overall liquidity position at the group level remains stable. Having said that, we are focused on improving the balance sheet further over time, both by settling down loans as cash generation allows and by managing our overall leverage more efficiently. Protecting shareholder wealth over the long term is a core priority and disciplined capital structure management is a key part of how we get there.
5- The electrical and wood industries sectors experienced pressure on sales and margins. How do you assess the current demand levels in these sectors? Are there any indications of improvement during the second quarter?
Both the Electrical and Wood segments experienced some softness during Q1-2026 and we want to be transparent about that. In Electrical, we saw a moderation in sales, which weighed on the segment’s gross margin. In Wood, the dynamics were similar, with lower volumes and pricing pressure in certain product categories impacting profitability. In addition, the Wood business has been navigating through a more challenging logistical environment given the current geopolitical situation, with longer lead times and higher freight costs on certain inbound flows and this has added pressure on the segment beyond pure market dynamics.
It is also important to keep this in perspective. The Electrical segment operates in markets that are inherently cyclical and sensitive to project timing, customer phasing, and broader market conditions, with Q1 typically reflecting the slower pace of activity during the early part of the year.
We have navigated similar phases before and our approach remains focused on margin discipline, higher-value product lines and operational efficiency rather than chasing volume. The underlying fundamentals continue to be supportive over the medium term, with the Kingdom’s ongoing investment in housing, urban development, infrastructure and the electrification needs tied to Vision 2030, while newer opportunities such as our entry into modular data center solutions and the expansion of our medium-voltage offering gradually broaden our addressable market beyond traditional transformer and switchgear demand.
On whether Q2 will show improvement, we are not in a position to make a definitive call at this stage. Early indicators are mixed and the current geopolitical and logistical environment adds a layer of uncertainty that makes near-term forecasting more difficult than usual. What we can say is that we are actively working to recover momentum in both segments and that the broader group is now sufficiently diversified that softness in one or two segments can be absorbed by strength elsewhere, as Q1 itself demonstrated. That portfolio resilience is one of the key outcomes of the strategy we have been executing and it is what gives us confidence in the group’s trajectory even when individual segments face temporary turbulences.
6- The metals sector has seen improved profitability following a rise in average product prices. Do you expect margins and prices to continue improving in the coming period?
The improvement in the metals sector during Q1-2026 reflects both a recovery in average selling prices and the operational discipline we have maintained through a softer period. That being said, metal pricing is fundamentally driven by global and regional commodity dynamics that are largely outside our control and we would be cautious against extrapolating any single quarter’s trend forward. We are optimistic that the current momentum continues, supported by a healthy demand backdrop from Vision 2030 projects and infrastructure activity, but our focus remains on managing the business with cost discipline and product mix focus so that we are well positioned to capture upside when conditions are favorable and protect profitability when they are not.
7- How do you view the impact of current geopolitical tensions on supply and demand chains, particularly in the oil and gas and industrial products sectors?
We want to be straightforward on this point. The current geopolitical situation in the region remains volatile and it would be unrealistic to suggest that any industrial business operating in the GCC is fully insulated from it. Supply chains and global oil price dynamics ultimately affect every operator, directly or indirectly and Bawan is not an exception.
On the supply side, we continue to experience the kind of logistical challenges we flagged previously, including higher freight costs, shipping delays, longer lead times on certain inbound flows and in some cases force majeure declarations on specific deliveries. We have taken precautionary steps on parts of our foreign procurement and are actively working with our suppliers and logistics partners to mitigate impact and reroute where necessary. These are industry-wide dynamics rather than issues unique to Bawan, but they are real, and they require active day-to-day management.
In terms of segment exposure, the picture is differentiated. The vast majority of our legacy industrial operations, Metal Wood, Plastics and Electrical, primarily serve the domestic market. While this gives us a degree of insulation on the demand side, these segments are not immune to the broader environment. These segments (particularly Wood and Electrical) still carry inbound supply chain dependencies where logistical disruption, longer lead times and higher freight costs can flow through to operations and we are actively monitoring these pressures. The Oil Gas segment, given the nature of its business and customer base, has a more direct sensitivity to regional dynamics and we are watching that closely.
The honest position is this. We are managing through the current environment with the tools available to us, including pricing flexibility, inventory cover and active supply chain management. But the situation remains fluid and its full impact on the broader business environment is difficult to predict at this stage. We would rather flag this exposure transparently than understate or overstate it, because the reality is that majority of industrial operator in the region are not fully immune to how the regional situation evolves from here.
8- What are your expectations for the group’s performance during Q2 2026?
We are entering Q2-2026 with a healthy order book and continued momentum from the operational improvements reflected in our Q1 results. The fundamentals supporting our business remain intact and the diversification of our portfolio across Oil Gas, Electrical, Plastics and Metal Wood continues to provide the Group with a degree of resilience that has served us well through different market cycles.
At the same time, we would respectfully refrain from offering specific guidance on Q2 performance at this stage. We operate in an environment where a number of variables remain genuinely fluid, particularly the regional geopolitical situation and its knock-on effects on supply chains, logistics and broader market sentiment. The pace at which these dynamics evolve and the way they ultimately translate into operating conditions on the ground, is difficult to assess with any precision at this point. In our view, providing forward expectations in such a setting would not do justice to the underlying uncertainty.
What we are comfortable saying is that our strategy is on track, our segments remain well positioned within their respective markets and the structural earnings capacity of the group has been meaningfully enhanced by the investments and additions of the past period. Our focus continues to be on executing well, managing the variables within our control with discipline, and navigating those outside of our control as thoughtfully as we can. The shape of Q2 will inevitably reflect how the broader environment unfolds. Our focus remains on the medium-term trajectory of the group, while staying realistic about the near-term variables that are outside of our control.
