The Middle East Paper Co (Mepco), a vertically-integrated paper manufacturer in the region, reported a net profit of SR87.2 million ($23.24 million) in the first three quarters, an increase of 99.7 per cent from SR43.6 million ($11.62 million) in the same period of 2017.

Total sales revenue of SR659 million ($175.69 million) for nine months of 2018 was an improvement of 16.5 per cent on a year-on-year basis compared with SR566 million ($150.9 million).

In Q3 2018, total sales revenue of SR216 million ($57.5 million) improved from SR213 million ($56.7 million) in Q3 2017, representing a slight increase of 1.3 per cent.

Local sales have been taking a bigger part as containerboard consumer demand on imports softens. Sale mix still carries a higher percentage of non-conventional grade products to infuse more profitability.
 
Gross profit of SR190 million ($50.6 million) in the nine months of 2018 increased 43.7 per cent from the same period last year and by 3.1 per cent on the previous quarter. Improved performance was driven primarily by end product prices relative to 2017 and direct and indirect cost controls.

Operating profit of SR109 million ($29.06 million) in the first nine months of 2018 increased by 68.3 per cent on the previous year and by 1.2 per cent on the previous quarter.

Mepco achieved a net profit of SR87.2 million ($23.2 million) in the first nine months of 2018, a significant improvement of 99.7 per cent on the same period in the previous year, with Q3 net profit up 4.3 per cent on the previous thee-month period.

The company’s EBITDA ratio for the nine-month period ending September 30 was 26.3 per cent, as compared with 23.3 per cent for the same period in 2017. Earnings per share (EPS) of SR1.75 for nine months of 2018 improved from SR0.87 for the same period in 2017.

Consolidated borrowing levels were reduced by SR113 million ($30.13 million) from SR750 million ($199.9 million) in 2017 to a total of SR637 million ($169.8 million) for first nine months of 2018, as a result of better utilisation of business cash flows and Capex reductions.

In addition, the company has been successful in settling existing higher-cost loans and securing more competitive new financing facilities.

Engineer Sami Safran, chief executive officer, said: “We are pleased to announce continued improvement in year-on-year performance on both a quarterly basis and for the nine-month period ended September 30.”

“Year to date, operating and financial performance has delivered improved sales revenues. The global containerboard market has seen significant changes after the Chinese environmental regulation took effect in the second half of 2017. As prices stabilise during Q2 and Q3 2018, they remain at a substantial premium to 2017 levels. Eventually, prices are bound to correct, but we still expect the overall performance of this year to remain quite favourable compared to 2017,” he said.

Safran continued: “Locally, we witnessed signs of demand softening. However, this impacted imports rather than local purchase of containerboard consumers. This explains the increased proportion of local/export sales realised during the past consecutive quarters.”

“In response to market demand; we have allocated close to 60 per cent of sales to local markets compared to 55 per cent for the same period last year. Our operational model allows it to comfortably benefit on both the local and export fronts,” he said.

“Finally, I reconfirm our commitment to maximise our shareholders’ wealth while adopting best possible practices in environmental, social, and governance domains,” he added.

Dr Mohamed Saleh Darweesh, chief financial officer, said: “I am pleased to report this set of solid financials for the nine months of 2018. Despite the fact that our sales volumes remain flat YoY, sales value was boosted by increased price levels relative to last year.”

“On the costing line, our average cost per ton increased at a lower rate than that of selling prices achieving improved margins. This translated into a 44 per cent increase in GP for the margin to reach 28.9 per cent compared to 23.4 per cent YoY, more than a five basis-points improvement,” he said.

“On the net income level; profit for the nine months 2018 doubled. Reductions in finance cost and gains on hedging instruments contributed to significant YoY increase. Meanwhile, in terms of our debt position, we have reduced borrowing levels as compared with the first nine months of 2017,” he added.

Darweesh continued: “This remains an important objective in a rising interest rate environment and we have been successful in reducing our cost of financing by settling more expensive debt obligations and securing more competitive facilities, despite an increase in average SAIBOR rates from 1.8 per cent to 2.3 per cent, this increase has been partially offset by reducing our bank margins and by profit rate hedging deals. Replacing some STLs with MTLs will further improve liquidity; evident our improved current ratio from 1.1x to 1.2x YoY.”

“We continue to improve our Debt-to-Equity ratio, which now stands at 0.83 and the net Debt-to-Equity ratio at 0.80,” he added. – TradeArabia News Service