MEPCO sees profitability by year-end: CFO

Middle East Paper Co. (MEPCO) headquarters

Middle East Paper Co. (MEPCO) expects to turn profitable by 2024-end, as Juthoor has started making profit since March 2024, CFO Amr Masry told Al Arabiya.

He expected this trend to continue, especially since the plant will operate on gas starting June, noting that the move will cut production costs and support profitability.

In an interview with Al Arabiya, Al Masri pointed out that converting part of the general expenses to production expenses does not affect profitability.

Masry added that the increased debt was attributed to the financing of operational activities, as production increased by 24,000 tons. With the completion of Juthoor's operations, the increase will range between 25,000 tons to 30,000 tons, which requires funding.

The investments transferred from the Public Investment Fund (PIF) are allocated for long-term investments only. Part of these investments was earlier announced, and an announcement will be made soon about the completion of the company's expansion plan.

Commenting on MEPCO’s financial results, Masry stated that the company's loss in the first quarter of 2024 was ascribed to two main reasons.

First, operating costs at Juthoor plant, which contributed about 12% to the net loss. The plant has two months remaining to complete its operational phase.

The second reason behind the company's loss was the year-on-year price comparison.

Prices were high in the first quarter of 2023, but they increased for cardboard materials by $20 per ton, compared to the fourth quarter of 2023.

Prices for Juthoor also rose by about $70 per ton, compared to the fourth quarter of 2023.

The CFO expected an increase in cardboard product prices by about $70 per ton in 2024 on an annual basis, as well as a rise in tissue paper product prices by around $100 per ton.

He alco pointed out a rise in profit margins to 16% in the first quarter, compared to 8% in Q4 2023, expecting further improvement with rising prices this year starting from the second quarter.

MEPCO widened Q1 2024 net losses to SAR 18.4 million, from SAR 6.6 million in Q1 2023, according to Argaam data.