Al Jouf Cement likely to witness higher sales in NEOM by H2 2024: CEO

Abdulkarim Al Nuhayer, Managing Director and CEO of Al Jouf Cement Co.

Demand for cement is expected to grow in the second half of 2024, supported by increased requirements from major government projects, said Al Jouf Cement Co.’s Managing Director and CEO Abdulkarim Al Nuhayer.

Al Nuhayer told Argaam in a phone interview that the strategic location of Al Jouf Cement factory, due to its proximity to export markets, serves projects in the Northern Borders Province, Al Jouf Province, and Tabuk.

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In addition, the strategic NEOM project led to a slight sales growth during the past period, which is expected to rise in the second half of 2024, he added.

Al Nuhayer pointed out that cement supply to projects such as Saudi Arabia's mega-project, “Mukaab”, started at the commencement of the project, followed by the drilling and infrastructure stages.

The company hopes demand from the Ministry of Housing projects will return, following expectations that the US Federal Reserve will reduce interest rates by the end of 2024.

Al Jouf Cement intends to renew the current export contract with Jordanian markets amounting to SAR 30 million for the same period and volume that was previously announced.

Here is the full interview with Al Nuhayer:

Q: Al Jouf Cement reported a 48% drop in Q4 2023’s profit to SAR 12 million. How do you see these results?

A: Al Jouf Cement achieved profit of about SAR 85 million in 2023, with a growth rate of 174% year-on-year (YoY), due to increased sales volumes, average selling prices, and production efficiency. In addition, the company saw higher production volumes, which led to lower fixed costs.

The company launched new products at reasonable costs, while continuing to implement initiatives that contribute to reducing costs.

Q: How do you see the external auditor’s reservations regarding the inventory and their impact on the company?

A: This reservation was due to the transition in calculating costs from the manual system to the enterprise resource planning (ERP) system, in addition to the inventory difference that occurred in the third quarter.

A financial statement review is undertaken every quarter, not an audit, which takes place by the end of the year.

However, the company's management took the following steps to avoid the auditor's reservation about the inventory, including the successful completion the application of the costing system, conducting an inventory of all types by the end of the year for a period of two months through two independent companies specialized in field surveying.

The external audit office, PKF Al Bassam & Co. participated in the inventory process with the participation of another accredited accounting office, to ensure the application of the accounting standard for calculating the cost of inventory.

Accordingly, the results were identical among the survey experts, and the cost accounting was similar between the external auditor and the accounting offices.

We also prepared a comprehensive statement of costs in two ways: manually and through the ERP resource planning system in 2023 and provided it to both the external audit office and the accounting office.

The results were consistent with accounting standards and operational standards for the cement industry.

Q: How much were the company’s registered loans by the end of 2023? And what are the latest developments in debt rescheduling with banks and the Saudi Industrial Development Fund (SIDF)?

A: The company’s registered loans stood at nearly SAR 646 million, as we are currently in advanced stages with the commercial banks (Alinma Bank and Saudi Awwal Bank) and SIDF. We expect to complete this process soon.

We sincerely thank the two banks and the SIDF for their great cooperation with us in terms of the industrial development of one of the national factories within Saudi Vision 2030’s objectives. It contributes to supplying local markets with the strategic cement commodity, whether for major or private projects, meeting citizens’ demands for the company’s products, as well as employing, training, qualifying Saudi youth, building national leadership, and effectively contributing to social responsibility towards the local community.

Q: What are updates on the general assembly’s approval to file a liability lawsuit against a number of former board members?

A: We emphasize our keenness to preserve shareholders, creditors, and lenders’ rights.

Thus, we assigned a lawyer’s office following the assembly’s vote on Feb. 9, to address the responsible authorities very soon to file a liability lawsuit.

We will not hesitate in future to file a complaint with the general assembly, in case of any suspicion of misuse of shareholders’ funds.

Q: What are the company's plans to mitigate the impact of Saudi Aramco's increase in heavy fuel prices?

A: We are working on several projects and initiatives to mitigate the impact of this increase, including connecting to the electricity grid and establishing a solar power station, which are expected to be completed in the fourth and second quarters of 2025, respectively. These two initiatives will reduce heavy fuel consumption by 30%.

Additionally, we are focusing on sustaining production operations, reducing downtime, and improving the raw material mix. This initiative is expected to further reduce heavy fuel consumption by 15%.

The gas connection project is forecast to be completed in 2028, and through this initiative, we will completely transition to using gas for operation instead of heavy fuel.

We extend our thanks to the liquid fuel displacement team, consisting of the Ministry of Energy, the Ministry of Industry and Mineral Resources, and the Ministry of Environment, Water, and Agriculture, for their support and dedication in overcoming obstacles to make this important national project a success.

Q: What are your expectations for the demand for Al Jouf Cement’s products from major projects in the coming period?

A: We anticipate demand to grow in the second half of 2024, buoyed by the expected growth in major government and private projects and those in proximity to the company's factory and projects in the Northern Borders, Al Jouf, and Tabuk regions.

The proximity of the Al Jouf Cement factory to the NEOM project further bolsters sales growth prospects. While the company experienced modest sales growth from the NEOM project in the previous period, we anticipate further growth in the second half of 2024.

The company is set to renew the current export contract to Jordan valued at SAR 30 million at similar term and volumes to the previously disclosed one.

Supplying cement to the projects starts after infrastructure and enabling works.

Further, we are looking for stronger demand for the housing projects after the Fed cut policy rates at the end of 2023, in line with estimates.

Q: What are the company’s plans for eliminating carbon emissions?

A: The company has a clear long-term strategic plan that includes several initiatives and projects to fulfill this national goal, which needs several years to be finalized. We mapped out an 18-year plan from 2022-end until 2040 to eliminate carbon emissions to below 5% by the end of 2040. These initiatives include:

- Energy efficiency, maintenance improvement and increasing the use of natural substances and renewable energy.

- Implanting 200,00 seedlings in the plant yard, in cooperation with King Salman bin Abdulaziz Royal Reserve Development Authority and the National Center for Vegetation Development and Combating Desertification.

- Cooperation with a global research center to constantly capitalize on all the clinker-related technologies.

- Power and gas linkage.

- Carbon capture.