Bawan clarifies PPA impact on Q4 2025 results

Logo of Bawan Co.

Bawan Co. said, alongside its financial results announcement on March 30, it provided supplementary disclosures regarding the accounting impact of completing the purchase price allocation (PPA) on its Q4 2025 results.

The company noted that this step aims to enhance transparency and disclosure, and to clarify items already included in the previously announced financial statements, without any amendments or contradictions to earlier disclosures.

Bawan had earlier announced the completion of its acquisition of the oil and gas manufacturing segment (Petronash) on Feb. 13, 2025. In accordance with IFRS 3 “Business Combinations,” the company initiated the PPA process to determine and measure the fair value of the acquired assets and liabilities, including identifiable intangible assets and fair value adjustments to property, plant, and equipment.

The company completed the PPA process in Q4 2025. As a result, total depreciation and amortization expenses arising from the PPA—related to identifiable intangible assets and fair value uplifts of fixed assets—for the period from the acquisition date (Feb. 13, 2025) to Dec. 31, 2025, amounted to SAR 121.37 million.

These non-cash expenses were fully recognized in Q4 upon completion of the PPA, leading to a significant concentration of non-cash charges in the quarter’s operating profit, which does not reflect the group’s actual operating performance for the period.

The group’s underlying operating profit for Q4 2025, before PPA-related depreciation and amortization, stood at SAR 100.14 million. This level is consistent with the group’s historical quarterly operating performance and the momentum seen in previous quarters.

However, it was significantly impacted by PPA-related non-cash expenses of SAR 121.37 million, resulting in a reported operating loss of SAR 21.2 million for the quarter.

Of the total SAR 121.37 million in PPA-related non-cash depreciation and amortization, approximately SAR 99.2 million was recorded within cost of revenue, reducing reported gross profit for Q4 from about SAR 195.6 million to SAR 96.4 million.

The company said this decline in gross profit was entirely due to the non-cash accounting adjustment related to the PPA and does not reflect any deterioration in the group’s business margins or operating policies.

The net impact of the bargain purchase gain on Q4 2025 earnings was about SAR 5.08 million, representing the difference between the bargain purchase gain of SAR 126.45 million recognized at the acquisition date and the PPA-related non-cash depreciation and amortization of SAR 121.37 million for the year.

Despite its effect on the presentation of results in the consolidated income statement, the overall impact on net profit for the quarter was largely neutral, according to Bawan.

Bawan expects to recognize PPA-related depreciation and amortization expenses on a quarterly basis starting from 2026, in line with the useful lives of the identified intangible assets and revalued fixed assets.

As stated in its annual results announcement, these expenses are expected to remain at similar levels next year before declining significantly as one of the key assets approaches the end of its useful life.

The company added that upcoming quarterly results are expected to more clearly reflect the group’s core operating margins, as PPA-related depreciation and amortization will be significantly lower than those recognized in Q4 2025.

Bawan concluded that the reported operating profits for Q4 2025 were heavily impacted by a non-cash accounting adjustment related to the completion of the PPA process, while the group’s underlying operating performance—including the acquired business—remains strong and in line with management expectations.

The company reaffirmed its commitment to transparency and full disclosure, noting that this announcement is for clarification purposes only and does not involve any amendments to previously disclosed financial information.

According to data available with Argaam, Bawan’s profits rose to SAR 218.3 million by the end of 2025, while Q4 profit stood at SAR 79.1 million. The board also recommended not distributing dividends.