Alkhorayef Water expects 25% backlog revenue hike in 2025, eyes new market entries: CEO

The company is looking to expand its business to cater to new customers, bid for privatization as well as long-term operation and maintenance (O&M) projects across the Kingdom. Meanwhile, AWPT seeks to boost growth by entering new sectors that complement and align with its specialization, he added.

Regarding the impact of diesel prices on operating expenses (OpEx), the CEO emphasized that the ongoing rise in diesel prices, along with the consequent increase in prices of raw materials such as asphalt, posed a direct challenge to project costs and profit margins over the past years.

However, AWPT managed to address this setback thanks to its proactive approach. During any bidding and project entry phase, the company relied on thorough studies that factor in potential price fluctuations, bringing about the respective countermeasures including setting provisions for possible price hikes annually, according to Moussilli.

He pointed out that AWPT raised the value of its contractual backlog to SAR 7.3 billion at the end of 2024.

Below is the full interview in details:

*AWPT profit rose to SAR 230 million by the end of Q4 2024, up 64% from SAR 140 million during the same period in 2023. How do you see these results? What were the key growth drivers?

- AWPT witnessed a remarkable growth in net income before Zakat by 64% to a total of SAR 230 million, with a margin of 12%.

Shareholders' equity also increased from SAR 537.6 million to SAR 776.24 million, with a return on equity (RoE) of 38% and a return on assets (RoA) of 35%.

The company also reinforced its leadership in the water and wastewater sectors by winning four long-term privatization projects worth more than SAR 13 billion.

Most notably among those projects was the Rais-Rabigh IWTP-2 project, valued at SAR 8.4 billion, which is being undertaken with Saudi Water Partnerships Co. (SWPC). The project, recently named the Best Privatization Project of 2024 in the Middle East and Africa by Project Finance International, is the first water transfer privatization project of its kind in Saudi Arabia, adopting a Build-Operate-Transfer (BOT) model.

The project aims to transport 500,000 cubic meters of water per day through 150 kilometers (km) of pipelines to provide drinking water to Makkah and Madinah, reflecting its strategic importance in supporting water security in Saudi Arabia.

Further, the company has successfully strengthened its portfolio in the privatization sector by winning three long-term contracts with the National Water Co. (NWC), covering Riyadh and Al-Ahsa.

The 15-year contracts, worth more than SAR 5 billion, cover the qualification, upgrading, and operation of 11 wastewater treatment plants, with a treatment capacity of more than two million cubic meters per day.

When implementing these projects, AWPT relies on its own capabilities and extensive expertise in O&M as well as engineering, procurement, and construction (EPC) services, reinforcing its position as a leader in the water privatization sector.

These projects also generate sustainable revenue streams, with O&M contracts spanning from 15 to 35 years. This is in addition to revenues generated from implementation work during the early years of the projects' lifecycle.

In line with its strategic vision, the company continues to utilize its expertise to provide integrated solutions, in line with the Kingdom's ambitious vision to develop the water sector, leveraging a supportive investment environment that promotes growth and sustainability in this vital sector.

*The company recorded a significant revenue increase of 16% to SAR 1.9 billion at the end of Q4 2024. What were the key drivers behind this uptick?

- The 2024 revenue hike was fueled by the company's strategic and integrated approach to providing water solutions. AWPT has developed an integrated model to mitigate potential challenges and compete effectively. We have expanded our expertise across the entire water and wastewater treatment chains through three interconnected delivery scopes:

1- O&M: Optimizing the performance of facilities to ensure long-term operational efficiency.

2- EPC: Providing integrated solutions for infrastructure construction and rehabilitation projects.

3- Development through public-private partnerships (PPPs): Implementing mega projects through strategic co-operation.

Owing to this approach, we have boosted revenues by integrating these methods, resulting in unprecedented improvement in profitability while maintaining sustainable growth.

*How did each of the company’s operating segments contribute to the overall topline in Q4 2024? Which segment grew the most during the three-month period?

- AWPT is focused on enhancing and expanding its revenue via the even distribution of efforts across its three core segments: water, wastewater, and integrated water services. This underpins our growth strategy for all business divisions to ensure diversification and reinforce the company’s financial sustainability.

In 2024, wastewater was the fastest growing segment, demonstrating a robust revenue rise given the recently-awarded mega projects. This was mainly represented by three long-term O&M projects awarded to the company, which strengthened our presence in this key sector.

These projects provide us with crucial expansion and growth opportunities, while also contributing to boosting the level of services provided to our customers. Accordingly, this enhances the company's prominence and ensures the long-term sustainability of financial returns from this sector.

*What was the impact of higher diesel prices on the company’s OpEx and margins in 2024?

- The uptrend in diesel prices, paired with the subsequent acceleration in prices of raw materials such as asphalt, posed direct challenges on project costs and margins over the past years.

However, AWPT managed to alleviate such additional costs thanks to its proactive approach. During the bidding phase for any potential project award, the company relies on diligent studies that factor in possible price fluctuations.

Provisions are earmarked for possible annual price increases, which cushion any sudden spikes in diesel and asphalt prices, thus minimizing the impact on profit margins on current and future projects.

As part of our commitment to maintain operational efficiency and soften the aftermath of these hurdles, we continue to adopt measures to curb additional OpEx. This is by optimizing procurement processes, restructuring certain operational aspects, and leveraging alternative plans to dial down the impact of price fluctuations.

Putting focus on operational integration and adopting more energy-efficient technologies also helps stabilize margins, despite the challenges associated with commodity prices.

*How much was the company’s contractual backlog at the end of Q4 2024?

- While boasting a dominant market share in periodic contracts for O&M projects and other services provision contracts in the water and wastewater sectors, the company still seeks business expansion. This is to cater to new customers and bid for newly-proposed privatization projects and long-term O&M projects Kingdom-wide.

In addition to achieving record revenues of SAR 1.9 billion during 2024, the company managed to expand the value of its contractual backlog to an all-time high of more than SAR 7.3 billion by 2024-end, underscoring its ability to maintain continuous growth in new contract awards.

*What is your outlook for AWPT’s performance in 2025?

- The company seeks to maintain its market leadership, further spur its sustainable growth, and expand its business scope. This is while maintaining resilience and adaptability to meet the needs of the Saudi water sector and its growth potential.

Furthermore, AWPT is expected to generate over SAR 2.5 billion in revenue from its contractual backlog in 2025, marking an annual surge of more than 25%. This is besides additional revenue generated from any project awards in 2025.

We constantly seek business expansion to reach new customers and bid for PPPs and long-term O&M projects across the Kingdom. This is in addition to the periodic O&M project contracts in which the company leads in terms of market share in Saudi Arabia, together with services provision contracts in the water and wastewater sectors.

We are always aspiring to find new solutions to boost our growth potential by entering new sectors that complement and align with our specialization, besides expanding our geographical foothold.

*Given this remarkable growth in revenue and profits, what is the company's cash flow position and dividend policy?

- AWPT saw a record collection of receivables of SAR 2 billion, while shortening the collection period to 60 days. This in turn helped secure positive operating cash flows by 2024-end, along with maintaining strong working capital.

We are confident in maintaining this solid cash position to support the company's continued accelerated growth. This is while sustaining future dividend payouts, as announced on March 17, 2025, regarding the 2024 dividend distribution.