Alkhorayef Water’s revenue likely to exceed SAR 1.3B in H2 2024: CEO

Rami Moussilli, CEO of Alkhorayef Water & Power Technologies

Alkhorayef Water & Power Technologies Co.’s (AWPT) revenues are expected to exceed SAR 1.3 billion in the second half of 2024, bringing the total revenues by 2024-end to SAR 2.2 billion, a growth of more than 30% year-on-year (YoY), CEO Rami Moussilli told Argaam.

Backlog revenues grew by 70% YoY at the end of Q2 2024 to exceed SAR 7 billion.

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Moussilli pointed out that the company maintained a noticeable diversification in the segments, as all of its segments witnessed significant growth in Q2 2024 compared to the same period in the previous year.

AWPT is always looking to expand its business to include new clients and compete for privatization projects, along with long-term operation and maintenance (O&M) projects in Saudi Arabia.

This is in addition to periodic O&M contracts, among which AWPT has the highest market share in the Kingdom, and project services contracts in the water and sewage water segments.

Here are the details of the interview:

Q: AWPT recently won several major privatization projects across Saudi Arabia. How important are these to the company and will is their expected impact on financial performance and profits?

A: Alkhorayef Water won four long-term privatization projects whose total value exceeded SAR 12 billion. The expansion of these huge development projects enhances the company’s success and exceptional growth, and contributes significantly to consolidating its leadership in the water and water sewage segments.

The Rayis-Rabigh Project (IWTP-2), which is one of the pioneering projects and the first of its kind in the Kingdom, with Saudi Water Partnerships Co. (SWPC) has an approximate value of SAR 8 billion.

The consortium will build, own and operate for a period of 35 years the 150-km-long Independent Water Transmission Pipeline (IWTP-2) with a capacity of 500,000 cubic meters per day in a two-way direction, to supply Makkah and Al Madinah with water, for a period of 35 years.

We also expanded our portfolio in the privatization sector by winning three long-term operation and maintenance (LTOM) projects with the National Water Co. (NWC) for a period of 15 years in Riyadh and Al Ahsa, with a total value above SAR 5 billion.

The company is unique in these projects in its ability to finance, design, rehabilitate, construct, raise the efficiency, operate and maintain 11 wastewater treatment plants, with a total treatment capacity exceeding 2 million cubic meters per day.

These achievements contribute to the uniqueness of AWPT as a major developer in the Kingdom, with integrated capabilities in O&M and implementation, relying entirely on its internal expertise and resources.

This competitive advantage enhances the company’s exceptional growth in the privatization of the wastewater sector, in light of the support for the water sector and the increase in unique investment plans in the Kingdom.

These projects also contribute to ensuring long-term revenues from O&M works that extends from SAR 15 to 35 years, in addition to revenues of the implementation work that extends during the first three years of the project’s life.

Q: What was the company’s backlog at the end of Q2 2024?

A: With the expansion of the company’s work in privatization projects and LTOM, and with the largest market share in periodic contracts for O&M projects and project service contracts in the water and sewage water segment, AWPT witnessed a remarkable growth in net income for the second quarter of 2024 by 116% YoY. The company also achieved a 75% growth YoY in H1 2024 net earnings to SAR 120 million. Total shareholders' equity also increased to SAR 657.5 million, marking a return on shareholders' equity of 37% and a return on assets of 10%.

AWPT maintained remarkable diversification, as all of its segments witnessed significant growth compared to the previous year. The water segment recorded a rise of 34%, while the sewage water segment improved by 8% YoY. The water segment posted a gross profit margin of 25%, the sewage water segment witnessed a margin of 14%, while the integrated water solutions segment reported a margin of 17%.

The value of remaining revenue from company’s contracts to be recognized (backlog), grew by 70% at the end of the second quarter of 2024 to cross SAR 7 billion. This contributed to the growth of the company’s diversified revenues as a result of a combination of multiple business scopes, which the company is distinguished by, as development and implementation contracts represent 62%, while O&M project contracts represent 23%. LTOM projects constitute 205 of total backlog contracts in addition to SAR 4 billion of backlog contracts by the sister companies as well as wholly and partially owned companies.

Q: You previously announced a capital increase. How does the company plan to benefit from this increase?

A: The main goal of the company’s capital increase is to enhance our strategies for growth and expansion in the Kingdom in general and in the water and sewage water sector in particular, as well as to confirm its financial solvency by strengthening the company’s capital base. The capital was raised from SAR 250 million to SAR 350 million, with the number of shares increasing from 25 million shares to 35 million shares, through a 1-for-2.5 bonus issue.

This increase contributes significantly to supporting the expansion of the major projects in which the company competes, such as drinking water and sewage water privatization projects, in addition to operations, maintenance, and infrastructure projects for the water sector, which is witnessing significant growth in the Kingdom.

Q: What are the main reasons behind the rise in the value of credit facilities with different banks? How will the company use these additional funds?

A: AWPT has strong financial statements and a debt-to-equity ratio of 2.21, which indicates that the company does not rely heavily on loans to finance working capital, with total loans standing at SAR 626 million at the end of the first half of 2024.

We usually use financing in the first months of periodic operation, maintenance, and construction contracts during the start-up and preparation period for new projects. Following that, the reliance on financing decreases as we start collecting business revenues.

Q: What are your expectations for the company’s performance in the second half of 2024?

A: The company seeks to maintain its leadership in the market, enhance its sustainable growth, and expand the scope of its business, while maintaining flexibility and the ability to adapt to respond to the requirements of the water sector and its growth in the Kingdom. AWPT’s strategy always depends on its ability to achieve balanced growth in revenues and profits, while maintaining the strength of its balance sheet and capital structure. This strategy has provided the company with the ability to withstand market fluctuations, including inflation and high interest rates.

The company is expected to achieve revenues of more than SAR 1.3 billion in H2 2024, with the value of revenues increasing by the end of 2024 to SAR 2.2 billion, achieving growth of more than 30% YoY.

AWPT is always looking to expand its business to include new clients and compete for privatization projects, along with long-term operation and maintenance (O&M) projects in Saudi Arabia.

This is in addition to periodic O&M contracts, among which AWPT has the highest market share in the Kingdom, and project services contracts in the water and sewage water segments.

We are always looking to find new solutions to enhance the company's growth by entering new sectors that are complementary to our specialty, and through geographic expansion.