Saudi group East Pipes posts quarterly loss; but outlook bright
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Mohammed Al Shaheen
East Pipes Integrated Company for Industry, a top manufacturer of helical submerged arc welded (HSAW) pipes in Saudi Arabia, has posted a net loss of SR19 million ($5.06 million) for its first-quarter (Q1) of its current financial year (2023-24) ending June 30.
But, the company has won a significant contract award of over SR1.8 billion from Saudi Aramco for the manufacture and supply of steel pipes. The financial impact of this contract will be reflected in Q3 and Q4-FY24 and Q1-FY25.
Revenues of SR39 million decreased 81% YoY (Q1-FY23: SR206 million) although production activities are progressing well, but, in line with the delivery schedules of some projects, the associated revenues fell short this quarter, and inventories increased from SR65 million as of March 31, 2023 to SR209 million as of June 30, 2023.
EBITDA loss amounted to SR5 million, compared to an EBITDA of SR18 million in Q1-FY23, primarily due to the decline in revenues due to a drop in sales volumes. As a result, EBITDA margin came in at -14% in Q1-FY24, compared to 9% in Q1-FY23.
Decline in revenues
Net loss amounted to SR19 million in Q1-FY24, compared to a net profit of SR6 million in Q1-FY23 which is primarily attributed to the decline in revenues during the period.
Cash and cash equivalents stood at SR147 million increasing significantly from SR53 million as of March 31, 2023. Meanwhile, borrowings increased 18% from SR245 million to SR288 million, but net debt to equity decreased from 0.31x to 0.24x as of 30 June 2023.
Effective management of working capital resulted in a marked improvement in cashflow from operations, which amounted to SR54 million (SR38 million as of June 30, 2022).
Key highlights
Increasing focus on selling and marketing activities to augment brand name in the market and allow for capturing a large share of project awards.
Operational excellence remains a key priority for the company, supported by integrated and advanced manufacturing facilities, and is resulting in industry-leading yield on raw materials.
Mohammed Al Shaheen, Chief Executive Officer at East Pipes said: “We started our new fiscal year with some pivotal achievements for East Pipes, including the successful procurement of a contract valued at over SR1.8 billion from Saudi Aramco.
Core competencies
“Leveraging our core competencies, industry know-how, and distinguishing features, such as the wide range and high quality of our products, we anticipate achieving even more prominent milestones in the future. Moreover, we will continue to amplify our efforts in terms of sales and promotional strategies to enhance our market share and effectively execute an increasing number of high-profile projects in the kingdom.
“We are in a strong position to make an integral contribution to Saudi Arabia's expansive development initiatives, especially in the vital oil, gas, and water sectors. This plays an indispensable role in the national economy and reflects our unwavering support for the objectives of Vision 2030.”
Mohamed Darweesh, Chief Financial Officer at East Pipes said: “East Pipes witnessed a temporary decline in top line performance during the first quarter of FY24, although work on several projects is well underway, according to delivery schedules and in line with international accounting principles. We are looking forward to realising the positive impact of the projects that have been announced in the past two quarters on our financial results, during the latter part of this fiscal year.
Robust foundation
“We have established a robust foundation, to pave the way for the growth of our business in the future. This is particularly supported by our solid financial position, as we saw a remarkable 175% YTD improvement in our cash balances, whilst our working capital management strategies continued to produce fruitful results, with a 42% YoY rise in cash flow generated from operating activities.”
Ali Al Makrami, Vice President – Commercial at East Pipes commented: “East Pipes continued to consolidate its leading position in Saudi Arabia’s rapidly growing HSAW pipes industry. The recent contract award by Aramco, is yet another testament to the trust that our valued strategic partners are placing in us. This remarkable project is considered vital to the kingdom, as part of its drive to reduce the reliance on oil and is a natural progression towards its goals of utilising cleaner sources of energy.
“We will focus on further reinforcing such strategic partnerships and growing our backlog, as the market is indeed thriving, and mega projects, particularly under Vision 2030, continue to materialise. With the innovation and quality of our products being at the forefront of our competitive advantages, we remain proactive in expanding our operations, and tapping into substantial emerging opportunities in the market.”-- TradeArabia News Service
