2025 Middle East Working Capital Study

In the region, overall profitability has shown a modest improvement, rising by 30 basis points (bps) after two consecutive years of decline. 

Despite 2024 being a year marked by weaker oil prices and ongoing regional supply chain disruptions due to geopolitical tensions, we see that the cost of goods sold (COGS) as a percentage of revenue dropped by 60bps – the first time in three years. This reflects a sharper focus on sourcing strategies and early results from localisation efforts that have helped reduce disruption risk. 

However, we also note that selling, general and administrative (SG&A) costs as a percentage of revenue have increased for the first time in five years by 20bps to 8.1% across the region. This trend is particularly pronounced in Saudi Arabia – the region’s largest economy – where both SG&A and COGS as a share of revenue remain higher than in peers such as the UAE, underscoring the opportunity for transformation across Saudi Arabia.

The focus on working capital optimisation has continued in 2024 with an overall improvement of 5.6% - equivalent to six days - bringing the net working capital (NWC) days across the region to 101.7 days. The progress was driven equally by a decrease in the average collection cycle from customers (accounts receivables) and the average inventory holding time (inventory).

The COVID-19 pandemic has acted as a clear catalyst for working capital which has climbed up on the strategic agenda of top performing companies across the Middle East. Our experience in the market reflects this shift – evidenced by a growing number of inquiries and projects across both performance improvement of existing operations or consideration of working capital as a value creation lever in M&A transactions.

We also noted an increased use of receivables factoring, especially across Saudi Arabia, as a go-to tool for CFOs to reduce the burden of customer payment delays and this is also seen in the increase in short-term debt as well as interest expenses. While working capital financing is a good tool to improve performance, it can mask the internal inefficiencies in the collection processes, which many organisations can still drive significant improvements from.

Despite the continued YoY improvement, there are still opportunities across the region for substantial cash release. We estimate that as much as US$54.7bn is currently trapped on the balance sheets of publicly listed companies - representing a major opportunity for further cash release and value realisation.

Receivables performance continued to improve in 2024, with DSO falling to 81.1 days from 83.9 days in 2023. Following the post-COVID correction between 2021 and 2022, improvements in receivables performance have continued YoY. Across key markets in the region, we have seen an increased focus on improving the collections performance. Efforts range from tactical pushes to accelerate collections to structured order-to-cash improvements covering credit risk, billing and collections processes supported by process automation and the adoption of AI tools to support predictability and decision-making. 
 
Particularly during FY24, we have seen an increased use of financing products – particularly factoring of private and government receivables with the UAE and Saudi Arabia emerging as regional leaders in adopting these solutions.

Inventory efficiency also strengthened, with DIO improving by three days on average. This drop in inventory coverage comes during a year when the regional supply chains have come under pressure, particularly due to geopolitical tensions and Red Sea disruptions.

Some companies across the region have seen clear benefits from localising their supply chain, with shorter lead times enabling them to reduce safety stocks and mitigate risk. An increasing number of corporations have invested in supply chain visibility and planning tools, which have started to yield benefits. Nonetheless, there are a few key areas for supply chain opportunities across the region namely: inventory planning, inventory replenishment strategies and demand forecasting.