Riyadh Cables Group Company’s CEO: The company holds 32% market share in Saudi Arabia, and the profit is unaffected by metal price fluctuations

Borjan Sehovac, CEO of Riyadh Cables Group Co.

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Riyadh Cables Group Company (RCG) share in the Saudi and UAE cables market is estimated at 32% and 22%, respectively, CEO Borjan Sehovac told Argaam in an interview.

 

Despite fluctuations and changes in global metal prices, the company’s profits, during nearly four decades of operation in the cable industry, remained intact, as Riyadh Cables relies on a hedging policy, Sehovac added.

 

The group contributes to environmental sustainability through recycling materials in six raw materials factories.

 

Sehovac highlighted the size of the Kingdom's cable sector, as well as the company's products and targets. He also compared the firm's financial indicators with peers in the sector.

 

Here’s the interview with Sehovac:

 

Q: Could you highlight the performance of the cable sector in terms of size and products? What factors can influence product prices?

 

A: The Saudi and GCC cable markets are estimated at SAR 12.5 billion and nearly SAR 15 billion annually, respectively. These markets will likely grow to almost SAR 18.7 billion and SAR 20 billion by 2027, according to ADL Market Research.

 

The cable sector has a variety of products, including underground and overhead high and extra-high voltage cables that are used in the electricity generation and transmission sector, in addition to medium and low-voltage cables that are utilized in electricity distribution within cities and neighborhoods. The company also produces wires used in buildings and facilities, as well as telephone cables that are used in the communications network infrastructure. Cables & Wires prices depend directly on the prices of metals, mainly copper and aluminum.

 

Q: How many factories does Riyadh Cables have? What are their products? How much is their production capacity?

 

A: The group has 15 factories, 13 of which are located in Saudi Arabia and two are outside the Kingdom. These factories produce all types of power cables. They also produce communications cables and specialized cables for industrial applications, alongside fiber optic cables.

 

Further, Riyadh Cables produces raw materials used in cable manufacturing, such as polymers, rods of copper and aluminum, as well wooden and steel drums.

 

Q: How much do you estimate your market share locally and in GCC markets?

 

A: Riyadh Cables is a leading cable producer in the region, with an estimated market share of nearly 32% and 22% in Saudi Arabia and UAE, respectively.

 

Q: What about Riyadh Cables' strategic plans?

 

A: The company aims to be a leading cable manufacturer in the region. It also seeks to further expand in serving the local market, in order to be a strategic supplier for the Vision 2030 projects.

 

In addition, Riyadh Cables aims to expand in the neighboring markets to raise the percentage of exports to total sales.  The company strives to increase the percentage of local content for its products by using local human and natural resources as much as possible. It also seeks to keep pace with global trends in the energy sector, and continue to stand out by relying on research and development to manufacture new products and serve new markets.

 

Q: How does Vision 2030 reflect on the company's current and future plans?

 

A: Riyadh Cables seeks to align with Vision 2030 and sustainable development plans. The company is working to boost its export regionally and overseas, as well as produce cables serving the industrial environment in the Kingdom, including new industries. In addition, Riyadh Cables continues to develop products serving Vision 2030 projects, such as extra-high voltage and renewable energy cables.

 

The company considers Vision 2030 as a roadmap for its investment plans so as to be a key player in delivering the Vision objectives, whether in terms of increasing production capacity, boosting internal capabilities or introducing new products to the current basket. These exceptional expansions were needed to serve giga projects under Vision 2030.

 

This is clearly evident in the company's participation in some of the Vision 2030 projects, including the Sports Boulevard Project, which is a milestone for sports, artistic and cultural attractions. It is one of the world’s largest 400-kilovolt projects, which requires extending hundreds of kilometers of cables in a short time.

 

The Saudi Green Initiative (SGI), which is a key part of Vision 2030, aims to increase the Kingdom's reliance on clean energy, reduce carbon dioxide emissions and protect the environment. It, in turn, raised the curtain on a slew of projects in the renewable energy sector. Riyadh Cables played the most significant role in early access to the world of renewable energy cables (solar and wind). This helped us become a main cable supplier for several giga projects locally and regionally, such as the 300 MW Sakaka and 1.8 MW Sudair power plants.

 

Q: Which sectors are served by Riyadh Cables? And what about the company’s major clients?

 

A: The company provides services to various sectors, such as industrial, mining, petrochemicals, oil, gas, communications, housing and real estate development.

 

The company has a strong portfolio of major clients, including local, GCC and foreign utility companies, large scale construction and contracting firms, real estate developers, and local electrical products wholesale & retail markets .

 

Q: Riyadh Cables products are a major component in the ICT age. Can you provide more insight into the role your products play in improving and developing contemporary societies?

 

A: Saudi Arabia has witnessed a digital revolution in the past few years through different initiatives that serve the government and private sectors, including e-governance, and networks that link capital market, banks, government and private agencies, as well as utilities.

 

These projects require an expansion in the telecommunications network to deliver data to the largest number of users. Accordingly, some projects emerged, such as fiber-to-the-home (FTTH), communications infrastructure development projects, datacenters, and cloud computing centers.

 

Riyadh Cables played an important role in serving these projects and similar investments locally and regionally, given that it is one of the fiber optic and telephone cable producers in the Kingdom.

 

Q: How does Riyadh Cable contribute to the Kingdom’s strategy to reduce carbon emissions and protect climate?

 

A: Riyadh Cables shifted to natural gas instead of diesel at its metal casting facilities as it is a more environmentally friendly solution. The company also works on devising solutions for alternative renwable energy at some of its facilities.

 

Riyadh Cables owns six supporting factories to produce raw materials for cable manufacturing. This helps the company recycle some materials in the production process, which will in turn mitigate the impact on the environment.

 

Riyadh Cables ranks among key suppliers of renewable energy cables supporting the Kingdom’s plans for generating 58.7 gigawatt of renewable energy with locally made products.

 

Q: Copper and aluminum prices have sharply fluctuated in the last two years. How can you hedge against these fluctuations to maintain profit?

 

A: Riyadh Cables has been working in the cable manufacturing industry for almost four decades, when global metal prices have fluctuated but without any impact on the company’s profits.

 

Therefore, Riyadh Cables did not incur any loss since inception. To date, the company posts positive profits, evident in its financial statements as highlighted in the IPO prospectus. Riyadh Cables adopts an internationally recognizable hedging policy, so that any change in metal prices will not directly impact its profitability.

 

Q: With respect to the company’s positive results, can you detail Riyadh Cables’ key financial ratios, compared to sector peers?

 

A: Riyadh Cables has reported positive financial ratios in the last few years. We compared these ratios with global industry peers, as follows: