Revenues – SAR690mn, -22% Y-o-Y, -3% Q-o-Q, +3% vs EFGe Gross profit – SAR202mn, -63% Y-o-Y, -24% Q-o-Q, -6% vs EFGe Operating income – SAR185.5mn, -65% Y-o-Y, -25% Q-o-Q, -8% vs EFGe Net income – SAR181mn, -68% Y-o-Y, -39% Q-o-Q, -22% vs EFGe   Saudi Arabian Fertilisers Company (SAFCO) reported its 3Q16 financial highlights, showing weak earnings of SAR181mn (-68% Y-o-Y, -39% Q-o-Q) and missing both our (SAR233mn, -22% vs. EFGe) and consensus estimates (SAR264mn, -31% vs. consensus) by a wide margin. Earnings declined despite an improvement in volumes by 24% Y-o-Y - which was higher than our expectation – as it was not enough to offset the poor urea prices (urea: -26% Y-o-Y & -7% Q-o-Q, ammonia:-53% Y-o-Y , -22% Q-o-Q) that are now at a 13-year low. Lower earnings Y-o-Y and Q-o-Q were also attributable to a decrease in investment income from Ibn Al Baytar in 3Q16, as stated in the earnings release. On an annual basis, the company noted that the increase in feedstock prices, coupled with an increase in SG&A expenses, had a negative effect on earnings. While full financial statements have not yet been released, the miss on the bottom-line was due to i) Lower-than-expected margins, as SAFCO generated a gross margin of only 29.3% vs. 37.3% in 2Q16 and vs. our estimate for 32%; and ii) lower-than-expected investment income from Ibn Al Baytar.   We remain bearish on SAFCO as i) the market continues to suffer from oversupply, driven by Chinese exports (6.8mn tonnes YTD) and additional supply coming to the market in the next two years; and ii) risks of further feedstock prices hikes in Saudi Arabia. We believe the stock continues to trade at unjustifiably expensive multiples (2016e P/E of 26x, 2017e P/E of 25x); hence, we reiterate our Sell rating on SAFCO stock. (Earnings release, Ahmed Hazem Maher, Yousef Husseini)   SAFCO: SAR65.14 as of 17 October 2016, Rating: Sell, FV: SAR55.00 per share, MCap: USD7,238mn, SAFCO AB / 2020.SE