Saudi Paper expects to finalize Kuwait factory expansion in H1 2019

Saudi Paper Manufacturing Co. (SPM) expects to finalize expansion works at Kuwait-based Al Jothoor Facial Tissues Paper Factory in H1 2019, Hassan Asiree, the company's chief executive, told Argaam in an exclusive on Thursday.

The company has bought a land plot from the Kuwait government for the planned expansion and is reviewing contractor bids.

For the company's plans to sell a 25,000-square meter land plot, Asiree said, "SPM aims to dispose of unutilized assets, such as its warehouses and land plot to raise cash amid the current economic changes. We'll sell this land at the best price and use the related proceeds to avoid potential impairment in unused assets."

Meanwhile, the company allocates regular provisions to cushion against potential defaults in receivables collection. Such provisions will be reversed upon settlement of receivables, according to the applicable accounting standards.

Commenting on Q2 2018 performance, Asiree said SPM's results were hurt by lower sales revenue and volumes due to seasonal factors that impacted all manufacturers of consumer materials.

These seasonal factors also coupled with the Kingdom's economic cycle and restructuring plans, which weighed negatively on consumer affordability.

Meanwhile, the paper industry usually reports lower sales in the second and third quarters of every year.

SPM was also hit by higher expenses, government fees, and the related indirect impact on contracted parties.

The Kingdom imposed a 15 percent anti-dumping fees on tissues imported from outside the GCC region. However, such products are still exported to other neighboring GCC countries, which failed to impose anti-dumping fees.

SPM is continuing cost cutting, through merging various divisions, reducing the number of employees, shutting down some warehouses and applying a more flexible outsourcing system. 

SPM's operations in Morocco and Turkey were suspended, with the related costs minimized last year, without any significant impact on the group's financial results – except for some expenses for commercial registers to maintain its legal entity.

"We boosted our local market share to over 12 percent earlier this year, from almost 3 percent at the beginning of 2017," Asiree said.

The company also raised some product prices, while improving their quality. Maintenance of SPM's three production lines was completed at the end of 2017 and production capacity stood at 100,000 tons annually, or over 90 percent of the plant's designed capacity.

"SPM is continuing its restructuring plans, to overcome the current economic challenges. We have a bullish outlook, after cutting our losses and maintaining stronger performance despite tough conditions," Asiree added.

The company widened net losses in the second quarter to SAR 10.3 million, from a loss of SAR 3.8 million in Q2 2017.