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Working Capital

2018 Middle East Working Capital Study

Our 2018 Middle East Working Capital Study looks at the working capital performance of over 370 publicly listed companies across the Middle East based on the past 5 years of publicly available financial information.

Key findings

AED 112 bn

can be released from the balance sheets of companies in the Middle East

CAPEX and dividend payouts

at lowest point in 5 years

Total debt level

are at their highest point in the last 5 years

Working capital performance

has deteriorated despite a stretch in DPO (Days Purchases Outstanding) creditor payments

Only 7% of businesses

improved working capital performance for three years consecutively

Median performers lose groud

as top quartile continue to extend their gains

First time since 2013

very large businesses see a decline in working capital performance

Top working capital performers

outperform on all key financial KPI's

Working capital performance has continued its deteriorating trend across the Middle East since FY 2013

Our latest study shows a staggering AED 112 billion of trapped liquidity across all three areas of working capital (inventory, receivables and payables) for Middle East listed companies. Improving the median performer's working capital in each sector could help companies increase their capex spend, improve their dividend payouts or support a more efficient capital structure by reducing debt.

Most importantly our study shows that both dividend payouts and capex spend are at the lowest points in the past 5 years. Yet, debt levels are at the highest point in the past 5 years, and at the same time increasing interest rates have been putting more pressure on liquidity.

Working capital performance has continued to deteriorate driven mainly by inventory and receivables as in the previous years. It appears that companies are continuing to address this issue by increasing the creditors cycle rather than more sustainable operational improvements across debtors and inventory.

In the past year we have seen movements in both the top and bottom performing quartiles whilst median companies have remained stable. With top performers increasing their lead on median performers, and bottom performers closing the gap between median performers year on year, not addressing working capital will mean that business will be left behind as there is a very good chance suppliers or customers from your value chain will be working on improving their working capital position.

Although circa 50% of the companies have improved their working capital year on year, sustainable working capital improvement remains elusive for the vast majority of Middle Eastern companies. Only 7% of companies in our survey sustainably decreased working capital days for 3 consecutive years, and a mere 2% for 4 consecutive years.

Working capital trend days

Working capital efficiency in the Middle East (on average) has deteriorated since 2013. During 2013-2017, Net Working Capital days have deteriorated by 14 days, which corresponds to circa AED 33bn of additional cash tied up in operations by business in the Middle East.

Despite a continued stretch of payables and a rebound in revenues during 2017, working capital continued to deteriorate driven by the inability to accurately plan the right inventory requirements and a decline in collections performance.

At the same time, total debt in the Middle East has been building up whilst both CAPEX and dividend payments have been curtailed. Better working capital management has a key role to play to help support increased capex and enable further dividends for the companies in our study.

This year we have already seen a rise in the FED rate which would indicate that interest rates are set to increase in the future and if this is the case, working capital becomes the most attractive source of cash to fund the potential capex or dividend needs.

Working capital days trend

Receivables, inventory and payable trends

Days Sales Outstanding and Days Inventory Outstanding have been the main drivers of weakening working capital efficiency for the companies in our study. Whilst both Days Sales Outstanding and Days Inventory Outstanding have gone up by a modest circa 2 days in 2016-2017, this in cash terms is significant and equates to AED 19bn of additional cash tied in receivables and AED 6bn in inventory.

Days Sales Outstanding has increased constantly from 2013-2017 despite overall revenue decline in the same period, reflecting cash collection challenges. We noted a strong deterioration in the rate of collections in both B2B and B2C channels, in particular, Communication, FMCG distribution and the Energy and Utilities sectors deteriorating circa 12% year on year.

Days Inventory Outstanding increase has been driven largely by Industrial Manufacturing and Engineering & Construction industries more than other sectors. We have seen particular challenges around demand and production planning, resulting in excess inventories or wrong mix of inventories.

Whilst Days Payables Outstanding has improved over the period, we do not see this as a sustainable level. Larger company's appear to be pushing the impact of tightening liquidity and deterioration in Days Sales Outstanding to their suppliers, rather than sustainable strategies to work with suppliers to systematically redefine credit terms or adopt more innovative ways to work with suppliers such as supply chain finance.

With a significant portion of international spend typically based on letters of credit, underlying non-international creditor days are significantly greater, creating enhanced cash pressure on local suppliers.

DSO, DIO and DPO trends

Quartile performance trend

Quartile performance trend

The evolution of Net Working Capital days trend over the 5 year period indicates that whilst top performers are continuing to improve and increase the gap between median performers, the bottom performers are slowly catching up on the median.

We see an increasing trend in the market from companies comfortable with median performance, but in these conditions doing nothing is the worst option as its highly likely that one or more companies from their end to end value chain to actively seek working capital improvements.

Net Working Capital development by company size category

Larger companies tend to be able to consistently outperform their smaller peers on working capital efficiency as they possess more resources to invest in process improvement and technologies. This is evident in our study as the overall level of Net Working Capital days strongly correlates with company size.

Net Working Capital performance deterioration of ‘Small’, ‘Mid’ and ‘Large’ companies has flattened in 2017 but the companies have yet to see a recovery in performance. Interestingly, ‘Very large’ companies, that were able use their market power to improve Net Working Capital performance year on year (2013-2016) at the expense of their smaller peers saw their Net Working Capital performance deteriorate in 2017. The deterioration was mainly driven by Days Sales Outstanding, which went up by 9.2% in 2016-2017. This suggests, that whilst in previous years we have seen deterioration of working capital within small and mid sized companies, the very large companies are now also feeling the impact of tightening liquidity, putting their cash collections processes under pressure.

2013 - 2017 Change in Net Working Capital KPIs

2013 - 2017 Change in NWC KPIs

Net Working Capital development by country

Companies in all key countries in the region besides the UAE have seen their average Net Working Capital days deteriorate in 2013-2017. The deterioration has been driven by Days Sales Outstanding in KSA, Oman and Qatar, and in Kuwait and Jordan by both Days Sales Outstanding and Days Inventory Outstanding.


Net Working Capital performance in UAE has modestly improved during the study period driven by Days Payables Outstanding, which has gone up by a CAGR of 8% in 2013-2017. This indicates that instead of driving process improvements across cash collections and inventory management, the UAE companies have improved their Net Working Capital performance through adding more pressure on their supply chain.

Variation in absolute level of Net Working Capital days between countries likely reflects different industry mixes between countries.

Net Working Capital development by industry

Net Working Capital performance in 2016 - 2017 improved in companies in all but one industry (Technology).

Only three industries out of the 15 industries covered over 50% of the number of companies that managed to improve their working capital. In the Automotive and Energy sectors, the improvement was driven by payables, whilst in the Chemicals industry, companies were able to improve their receivables and inventory management.

Irrespective of sector, and whilst there are a number of external factors that can influence working capital, a strong management focus can have a significant impact on working capital performance.

Top vs. Bottom working capital performers

Improving Net Working Capital performance has positive impacts beyond cash. Our findings suggest that top Net Working Capital performers within different industries have been able to increase revenue and profits significantly more than their peers with weaker Net Working Capital performance.

In addition, the top Net Working Capital performers have been able to afford more capex to fund growth and to generate more cash to grow dividend distribution.

Cash collection is a growing problem for companies in the Middle East. Our study reveals that top Net Working Capital performers collect cash three times faster than their competitors suggesting that ensuring efficient cash collection is high on management's agenda in top-performing companies.

Top vs. Bottom working capital performers

How we can help


Complete a working capital benchmarking exercise to compare performance against peers and identify potential improvement opportunities.


Perform a diagnostic review to identify ‘quick wins’ and longer-term working capital improvement opportunities.

Roadmap Definition

Develop detailed action plans for implementation to generate cash and make sustainable improvements.


We take a hands-on approach to change operational behavior 'on the shop floor'. We provide a proven toolkit and expertise to support management in driving sustainable improvements. Typically, achieved improvements range from 15-30% of existing working capital.

This study provides a view of the Middle East working capital performance and is based on the financial results of 371 publicly listed companies across the Middle East. The countries covered include: Bahrain, Egypt, Jordan, Kingdom of Saudi Arabia, Kuwait, Oman, Qatar and United Arab Emirates. All currencies have been converted to UAE dirhams at historical rates. The financial services, real estate and insurance sectors are excluded. All financial data has been downloaded in a standardised format from S&P Global Market Intelligence.

Companies have been assigned to countries based on the location of their headquarters. Although a significant part of their sales and purchases might be realised in that country, it does not necessarily reflect typical payment terms or behaviour in that country. As the research is based on publicly available information, all figures are financial year-end figures. Off-balance sheet financing or the effect of asset securitisation have not been taken into account.

Contact us

Mihir Bhatt

Director, Deals Advisory, Lead Author, PwC Middle East

Tel: +971 50 900 9471

Dan Georgescu

Business Restructuring Services, Senior Manager, PwC Middle East

Tel: +971 5 6418 9776

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