Zahrat Al Waha maintains 40% market share in Q2 2020, no VAT impact on sales: chairman

Zahrat Al Waha for Trading Co. maintained its market share between 35% and 40% during the second quarter of 2020, despite the COVID-19 pandemic economic challenges, board chairman Ahmed Al-Theyab told Argaam in an exclusive.

The decline in sales was attributed to lower raw material prices, as selling prices are correlated to raw material costs. Moreover, raw materials are the basic element in production costs and the main catalyst for product pricing.

Zahrat Al Waha’s second-quarter sales volume hit 22,000 tons, a rise of 3% year-on-year (YoY). Meanwhile, the average raw material prices dropped 27% YoY, leading to a 19% YoY decrease in sales revenue.

The company ramped up production capacity by 5% YoY in the second quarter of 2020, Al Theyab said, adding that this is positive amid the current economic conditions.

Boosting production was one of the company’s targets, for which the company partially covered raw material costs. Accordingly, profitability was impacted.

Replying to a question about the plastic preform production lines, Al Theyab explained that the two lines were purchased, in line with the company’s expansion plan at a total estimated cost of SAR 20 million.

The two lines are expected to boost the firm’s production capacity to meet the increase in sales volumes, as well as fulfill demand locally and abroad.

“Zahrat Al Waha production capacity is likely to rise 14% to 121,000 tons annually following the addition of the new lines,” Al Theyab said.

The company also aims to reduce borrowing costs through curbing capital expansions and relying on the company’s internal resources. This helped reduce long-term loans, which will boost profitability.

Finance costs decreased by 8% YoY in Q2 2020, Al Theyab noted, adding that the value-added tax (VAT) had no significant impact on the company that operates in a core business activity.

Zahrat Al Waha reported a net profit after Zakat and tax of SAR 19.5 million for the first half of 2020, a 1.36% YoY increase. Net profit after Zakat and tax dropped 35% YoY to SAR 6.6 million in Q2 2020.