Cenomi Centers' Q1 profit fell to SAR 202.5M as financing costs rose to SAR 215.5M. Success now hinges on the 90%+ pre-leased Westfield projects scaling up.
Cenomi Centers, the Saudi-based retail real estate developer, faces a distinct period of financial transition as it balances the aggressive build-out of its flagship Westfield projects against the reality of rising debt service costs. In the first quarter of 2026, the company reported a net profit decline to SAR 202.5 million, down from SAR 216.9 million in the same period last year. While the headline figure suggests a contraction, the underlying mechanism is not a failure of core retail demand, but rather a deliberate, capital-intensive expansion phase that has pushed financing costs (FCs) to SAR 215.5 million, a significant jump from the SAR 162.6 million recorded in the prior-year period.
CEO Alison Rehill Erguven has been clear that the pressure on the bottom line is a direct function of the company's investment cycle. The capital required to bring the Westfield Jeddah and Westfield Riyadh projects to completion is currently being serviced through debt, which creates a temporary drag on net earnings. This is a classic capital expenditure cycle where the interest expense is front-loaded before the revenue-generating assets are fully operational. For investors, the key is to distinguish between operational health and balance sheet strain. The core business remains resilient, with operating profit rising 10.3% to SAR 436.1 million and EBITDA increasing 4.7% to SAR 374.3 million. When excluding non-recurring items, the EBITDA growth is even more pronounced at 7.2%, reaching SAR 383.3 million. This confirms that the underlying retail assets are performing well despite the broader corporate debt burden.
The investment case for Cenomi Centers rests on the eventual contribution of the Westfield projects to the revenue base. Westfield Jeddah is nearing its opening, having completed construction with a pre-leasing rate of 96%. Westfield Riyadh is similarly advanced, with construction at 99% and a pre-leasing rate of 92%. These figures are critical because they provide a high degree of revenue visibility before the doors even open. The company expects a limited financial impact in 2026 as these assets begin partial operations, with the material contribution to revenue and EBITDA expected to scale as the assets reach full operational capacity. The company is targeting revenues between SAR 2.4 billion and SAR 2.5 billion by 2026, with EBITDA projected to hit between SAR 1.6 billion and SAR 1.7 billion. Management anticipates a 60% growth in EBITDA over the next three years, a target that relies heavily on the successful, timely integration of these new developments into the existing portfolio.
While total revenue saw a slight decline of 1.4%, this is largely a comparative artifact related to the Dhahran Mall in the previous year. On a like-for-like basis, revenues grew by 4.9%, driven by robust leasing activity and stable foot traffic. Furthermore, the company is successfully diversifying its income streams, with advertising sales growing 28% to SAR 33.3 million. This diversification is essential for mitigating the volatility of pure rental income and provides a higher-margin revenue layer that is less sensitive to the cyclical nature of retail occupancy. The company’s strategy to increase its total gross leasable area from 1.2 million square meters to 1.9 million square meters by 2029 is supported by new agreements, such as the development in Khobar with Saudi Downtown Co. This expansion into the Eastern Province is a strategic play to capture long-term demand in a region that continues to show strong fundamentals for stock market analysis.
The company remains in a transitional phase where operational performance is being weighed against the cost of future growth. Investors should monitor the pace at which the Westfield projects transition from construction to revenue-generating assets. Any delay in the opening of these malls would exacerbate the pressure from financing costs, as the interest expense would continue to accrue without the offsetting cash flow from tenants. Legal proceedings related to the Dhahran Mall remain ongoing, though management has indicated that these cases have not impacted operations or the broader expansion strategy. The second quarter is expected to maintain this transitional character, with the company focusing on project execution and maintaining high occupancy levels across its core portfolio. The ultimate test for the stock will be the conversion of these high pre-leasing rates into realized cash flows, which will be the primary driver for deleveraging the balance sheet and improving net profit margins in the coming fiscal years. Investors looking for a signal of success should watch for the actual inauguration dates and the subsequent impact on quarterly EBITDA margins, as these will be the first concrete indicators that the capital expenditure phase is yielding the expected returns.
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