Aslak’s Q1 results hurt by low demand: CEO

Nabil Alamir, CEO of Aslak 

United Wires Factories Co.’s (Aslak) Q1 2023 net profit was hurt by lower demand for reinforcement steel, due to a recession in the building and construction sector. Cement sales dropped 12% between the Q1 2022 and Q1 2023, CEO Nabil Alamir told Argaam, referring to declining raw material prices, which largely weigh on margins amid subdued demand.

The Q1 2022 results were exceptional, due to the reasons cited at that time. Accordingly, there was a wide margin between Q1 2022 and Q1 2023.

Alamir added that he hopes for improved demand and steady raw material prices, or no huge price gaps in the coming periods.

Sales revenue neared SAR 227 million in Q1 2023, compared to around SAR 298 million in the year-earlier period despite a drop in selling prices amid lower raw material costs, which contributed about 50% to the margin between both quarters.

The CEO added that Aslak continues to expand in high-margin products, which are expected to be in demand in the coming period. A full-fledged production line for highly-galvanizing wires was inaugurated to serve the electricity cables and highly-galvanizing fencing nets for vital sites.

Further, Aslak plans to expand in new products that serve the building and construction sector with qualitative demand and solid margins, and add production capacities of the civil sector, on which the company focus to improve margins going forward.

Meanwhile, Alamir said Aslak’s market share cannot be determined, due to its diversified products in several consumer sector. However, Aslak continues to boost its market share of highly competitive products, while maintaining its market share in lower-return sectors until demand improves, and in line with growth in other sectors to balance returns in the coming period.

Elsewhere, Alamir said the market saw some improvement following Eid Al-Fitr holiday, expecting this trend to sustain. He added that demand often starts in the second quarter for some products due to seasonal factors. Aslak aims to neutralize the negative impact of the construction sector-linked results.

Finally, Alamir expected changes to raw material prices to decline and to remain unchanged at the current level for a relatively reasonable period to avoid the impact of price fluctuations on sales margins. “Aslak is optimistic that demand by mega projects will begin after the challenges witnessed by the industry. We hope these challenges reached their peak,” he said, hoping for a market recovery in the second half of the year.