Riyadh Cables' net profit for 2023 soars to $138m
RIYADH, March 17, 2024
Riyadh Cables Group (RCG), a leading manufacturer of wires and cables in Saudi Arabia, has displayed tremendous profitability growth in FY2023, increasing the bottom-line by 47% to hit SAR518 million ($138 million), according to Al Rajhi Capital Research.
The growth was led by unwavering cable demand, which increased volume sold by 15% YoY to 219 kilotonnes.
As the majority of the costs are fixed for the company, this helped improve the gross profit per tonne to SAR4,442 per tonne in FY23 as against SAR3,406 per tonne last year (as per our calculations), up by 30% YoY, stated Al Rajhi Capital in its report.
In addition, a better product mix geared more towards copper cables also helped improve the margins. The utilisation levels for the company were 92% in FY23, as against 90% last year. This was mainly due to the addition of 12-13 kilo tonnes of capacity in FY23.
Keeping in view the strong cable demand, more capacity is expected to come online by Q2 this year, taking the total addition to 36 k tonne, said Al Rajhi Capital in its report.
"Going forward, the GP margin per tonne is seen at at SAR4,303/tonne which is at slightly lower level when compared with FY2023 but higher from the previous assumption of SAR4,089/tonne for FY24e," it stated in the report.
The Saudi financial expert in its report pointed out that the company had guided profitability growth in the range of 10-15%; however, the bottom-line is likely to grow by 19% YoY in FY24.
"Our confidence stems from the fact that there is strong demand for cable in the kingdom, which is likely to keep utilisation levels high as well as maintain the margin per ton for the company," the report added.
