Commodities demand declines, but MEPCO production holds at 92%: CEO

Sami Safran, CEO of Middle East Paper Co.

Middle East Paper Co.’s (MEPCO) Chief Executive Officer Sami Safran said that markets are witnessing weaker demand for commodities, including paper products.

However, due to the regulations of the domestic market, the prices of MEPCO products did not see any significant impact in Q3 2022, Safran added in a call with Argaam.

In an attempt to overcome the dumping crisis in the region, companies filed lawsuits against Spain and Poland and won, the CEO noted.

Regional companies have also filed lawsuits against Germany, France and India, which represents 60% of the dumped volumes in the GCC region.

Global demand slowed down and factories are operating at 86% instead of 92%, but MEPCO operated its plants at rates exceeding 92%, Safran said.

MEPCO maintained exports at 40% of output on average, which bolstered the company’s expansionary plans, he added.

Safran further cited the Kingdom’s geographical location and the lower total export prices, noting that cost of shipping increased in H1 2022 but decreased slightly in Q3 and Q4 2022. Additionally, crude inputs decreased that will contribute to controlling the operational cost and cope with the decline in product prices.

The work on fifth production line project will be launched by H1 2023, and it will take up to 33 months. The project comes in line with the Kingdom’s declaration of the National Industry Strategy and its support of the local content deployment, Safran stated, pointing out that the local content represents 80% of MEPCO products through adding investments to the waste management segment.

MEPCO’s levels of exports and local sales are unchanged, however, the company is facing some global challenges, which impact its markets. Yet, it still sees constant demand from clients.

As for Forex, Safran indicated that the company obtained some euro-denominated funds to finance the tissue paper project expansion, but the exchange rates changed while the company was retaining these funds.

The project is expected to launch operations before H1 2023, and will likely reflect positively on the company, he noted.

MEPCO reported net earnings, excluding minority interest, of SAR 245 million for the first nine months of 2022, an increase of 95% year-on-year (YoY), data compiled with Argaam showed.