Tasnee likely to see lower demand in Q3, Q4 on global recession: Al-Fawaz

National Industrialization Co. (Tasnee) is expected to witness lower demand during the third quarter and may be further into the fourth quarter of this year, due to the current global recession, said Finance Manager Fawaz bin Mohamed Al-Fawaz.

In an exclusive to Argaam, the official noted that demand levels fall during the summer period by rates ranging between 15-20%, due to the quality of the products required by customers, adding that not much stock is formed as a reflection of global events, which causes pressure on demand and consequently selling prices.

Asked about the decision to increase feedstock prices in the Kingdom, Al-Fawaz confirmed that the company has not received any official decision in this regard so far.

The official explained that there was a noticeable increase in feedstock prices, which led to a direct increase in production costs and inputs, thus reducing profit margins. He added that shipping and distribution costs are still high compared to previous years, but are starting to ease noticeably for the first time since the beginning of pandemic, as prices of services declined by 10-15%, and are likely to see further declines by 20-30% in Q4 and Q4 2022, depending on the exporting countries in the Middle East, Europe and Asia.

"Meanwhile, it is expected that average feedstock prices will decline in Q3 2022 by 10-15% quarter-on-quarter, in light of the decline in oil prices. We believe that the decrease in the average selling prices of finished products may be more than the average decrease in feedstock prices and shipping costs," said Al-Fawaz.

In Q2 2022, Tasnee saw an increase in sales by 38% year-on-year, backed by the increase in some sold quantities and average selling prices of most manufactured products. However, the increase in the cost of sales as a result of higher average prices of feedstock and production inputs, coupled with an increase in freight and distribution prices, was reflected in the lack of contribution of the increase in sales to net profit. This is in addition to the impact of other items such as the increase in the cost of financing and Zakat provision, according to the top official.

Al-Fawaz stressed that Tasnee always focuses on productivity and reliability of its factories to ensure solid and sustainable business and production of high-quality materials and items required for local and global markets, as well as achieving resilience in production and searching for markets that provide shipping lines, containers and distribution at reasonable prices, which will reflect positively and help offset the impact of lower selling prices.