Recurring net profit: KWD3.8mn, +27% Y-o-Y, -22% Q-o-Q, -7% vs. EFGe Reported net profit: KWD3.1mn, -15% Y-o-Y, -36% Q-o-Q, -24% vs. EFGe Revenue: KWD47.7mn, +3% Y-o-Y, -10% Q-o-Q, -5% vs. EFGe Gross profit: KWD12.1mn, -2% Y-o-Y, -11% Q-o-Q, -12% vs. EFGe Operating profit: KWD3.7mn, +18% Y-o-Y, -31% Q-o-Q, -3% vs. EFGe   Mezzan reported 3Q16 headline figures during its live webcast earlier today with a headline net income of KWD3.1mn, down 15% Y-o-Y impacted by losses at the recent KSA acquisition (first-time contribution in the quarter). Excluding KSA losses of KWD0.7mn (including transaction costs) and a one-off gain in 3Q15 (settlement of distribution deal termination), earnings were up 27% and only 7% below our estimate mainly on weak revenue.     Revenue grew only 3% Y-o-Y (-5% versus EFGe) with food manufacturing and distribution (c53% of total) posting slow growth (+5% Y-o-Y) mainly driven by Mezzan’s own brands rather than partner brands and on contribution from the distribution of Danone baby formula (first sales in 2Q16). Other segments performed as follows: FMCG & pharmaceuticals (c21%) were down 9% Y-o-Y due to lower sales of health & beauty pharma products as consumers cut down on discretionary spending as well as delays in tenders and price reductions in medicines by Ministry of Health; the segment was the main reason behind the top-line miss. Catering (c14%) reversed a four-quarter downtrend (on end of some government contracts in Kuwait) as expected and grew 7% Y-o-Y on some new three-year contracts (KOC in mid-May, KNPC in August and Petrofac labor camp in September). Services (c10%) +25%. Industrial (c3%) -20% due to lower oil prices.   Gross margin was down c1.4bps (gross profit -2% Y-o-Y, -12% vs. EFGe) while EBIT advanced 18% Y-o-Y and the margin was up c1bps Y-o-Y as SG&A costs fell 8% Y-o-Y (-14% versus EFGe).   Lowered revenue guidance to 4-7% given slower 3Q16 trends (earlier guidance was high-single-digit to low-double-digit growth); high-single-digit earnings growth guidance (ex. one offs and KSA transaction) on track despite underlying profit growth of only 4% in 9M16 on cost controls; capex-to-sales of 5% (from 3% in 9M16 due to spending on Kuwait water line by 2Q17 and UAE warehouse by 3Q17; food warehouse and snacks capacity in Kuwait by 1Q18).   Other takeaways from webcast: Market share continued to grow. Catering to return to profitability in 1Q17. KSA trading in line with expectations and will breakeven in 4Q17 as planned; new SKUs (chips) introduced from KITCO Sharjah factory. Management continues to look for acquisition opportunities given low leverage but nothing is imminent.   9M16 revenue highlights by country: Kuwait (c69% of 9M16 revenue) +4% Y-o-Y on higher food (boosted by Danone deal) and non-food sales that offset lower catering revenue in 1H16. UAE (c16%) down 4% on lower discretionary spend affecting Red Bull sales but there was in an improvement in 3Q16. Qatar (c9%) +14% on strong growth in both bottled water and catering. Jordan (c5%) +28% on new food tenders (“Services” segment) for the UN and WFP as well as the launch of a store in Azraq Camp.   The results confirm our view that the new KSA operation will be a drag on earnings in the short-term. We have a Neutral rating on the stock.   Mezzan: KWD0.98 as of 9 November 2016, Rating: Neutral, FV: KWD1.18/share, MCap: USD1,017mn, MEZZAN KK / MEZZ.KW