East Pipes Integrated Company for Industry, the top maker of helical submerged arc welded (HSAW) pipes in KSA, has made a turnaround posting a net profit of SR100 million ($26.66 million) for the fiscal year ended March 31, 2023. This is compared to a to a net loss of SR3 million made in FY22.
The remarkable recovery is attributed to a substantial improvement in project activity, with the outlook for both the water and oil and gas sectors in the kingdom being quite promising.
The company’s revenues of SR1.44 billion increased 141% YoY (FY22: SR597 million) due to the dual impact of a rising trend in sales volumes and improved average sales prices, supported by a robust recovery in demand.
EBITDA rises 312pc
EBITDA of SR161 million, increased 312% YoY from SR39 million in FY22, which is primarily driven by the solid top-line performance during the year.
EBITDA margin of 11% in FY23 (FY22: 7%) largely benefitted from the general improvement in market conditions, which translated to a strong pipeline of key projects, as part of the government’s continued focus on infrastructure development across the kingdom, under the Vision 2030 umbrella.
Cash and cash equivalents stood at SR53 million, compared to SR74 million as of 31 March 2022. Meanwhile, total borrowings decreased 11% from SR274 million to SR245 million, and net debt to equity decreased from 0.39x to 0.31x as of March 31, 2023.
Effective management of working capital resulted in a remarkable improvement in cashflow from operations, which amounted to SR18 million (SR99 million as of March 31, 2022).
Capital increase
During the period, the company had gone for a capital increase through bonus shares, whereby shareholders received 1 share for every 2 shares held. As a result, the total number of issued shares by East Pipes has increased from 21 million shares to 31.5 million shares, with a corresponding increase in paid-in capital from SR210 million to SR315 million. The bonus share issuance is in line with the company’s focus on optimising its capital structure, whilst returning value to its shareholders.
During the year, East Pipes signed a number of important contracts:
*Three contracts with Saline Water Conversion Corporation (SWCC) valued at nearly SR1.3 billion, for the manufacture and supply of steel pipes for water transmission;
*Multiple contracts with NEOM Co., for a total value of SR385 million, for supplying steel pipes for water transmission lines;
*A contract with PETROJET Co, valued at SR196 million, for the supply of steel pipes;
*Several contracts with a number of strategic contractors, for the manufacturing of pipes and pipe coating works.
Mohammed Al Shaheen, Chief Executive Officer at East Pipes said: “We transitioned from a private shareholding to a public shareholding company. We have clearly defined our goals at East Pipes, which are in line with our aspirations, as well as those of our valued shareholders. Our journey in the past year was quite exciting, starting with the financial results of the first quarter, which we expected, by virtue of the natural project cycle that could reach 12 months, followed by a quarter-on-quarter improvement, to witnessing a solid return to profitability.
Market share increase
“Amongst our most prominent achievements during the year is the increase of our market share to more than 80%, through leveraging our strong positioning, as well as our core capabilities and extensive expertise, and our advanced manufacturing facilities, and key competitive advantages such as the diversity and quality of our product offerings. The company has also secured several significant projects, with SWCC and a number of strategic business partners.
“In light of our focus on creating a balance between investing for the purpose of growing our business, and providing significant value to our shareholders, the Board of Directors is recommending the distribution of SR1 per share in cash dividends for FY23.
Mohamed Darweesh, Chief Financial Officer at East Pipes said: “We are marking the close of an exceptional financial year, during which we witnessed a substantial rebound in profitability, largely supported by the return in market activity and our focus on operational excellence in everything we do.
Financial strength
“The strength of our financial position, as we continued to deleverage our balance sheet, supports our ability to drive considerable progress in terms of the effective execution of our backlog. With working capital management being a key area of focus for us at East Pipes, we generated solid cash flow from operations in FY23, which is an important highlight of our strong financial performance. Looking ahead, we are targeting to deliver sustainable long-term returns to our shareholders, through capitalising on the positive momentum in the domestic market.”
Ali Al Makrami, Vice President, Commercial at East Pipes, commented: “East Pipes has successfully established a strong foundation, based on the key strengths of our business such as our advanced production capabilities, substantial manufacturing efficiencies, and the solid relationships that we have maintained with our valued business partners over time.
“These are just a few of the factors that are enabling us to continue to expand our customer base and grow our backlog at a steady rate, thus helping consolidate our leadership position in both the local and regional markets. The domestic operating environment is showing signs of a strong recovery in activity, with mega projects in the oil and gas and water sectors, in addition to other major projects such as NEOM, expected to pave the way for further growth for East Pipes going forward.
“We will continue to be an important contributor towards a key objective of the kingdom’s Vision 2030 of raising the level of local content, and with an increasing focus on privatisation, there are promising prospects for the water sector in particular, where we expect to unlock massive opportunities for our company.”-- TradeArabia News Service
