Aslak posts better profit margins in 2022 backed by high-yield products: CEO

Nabil Alamir CEO of Aslak

United Wire Factories Co. (Aslak) reported better profit margins in 2022, backed by its focus on high-return products that are not directly linked to the building and construction sector, which currently faces some challenges, CEO Nabil Alamir told Argaam in a phone call.

The building and construction industry slowed in the third and fourth quarters of 2022, Alamir explained, adding that it is linked to the housing sector whether through real estate developers or the housing ministry. The housing sector is suffering a deep recession.

The positive factor here is the momentum seen in the Saudi Vision 2030 and Riyadh city’s projects, Alamir added, expecting better demand this year.

The wire manufacturer’s revenue declined compared to Q4 2021, as the company did not focus on the construction sector products, which weighed on sales volume and value.

Aslak usually witnesses financial settlements in the fourth quarter of every year, the CEO noted, stressing that the 2022 results were better than the previous year, and came in slightly above full-year forecasts for total revenue and net profit.

He cited the seasonality of the company’s products, of which some have a higher impact in the second and third quarters of every year. Further, the seasonal nature of the local market changes from the year beginning until summer, and during the holy month of Ramadan and Hajj season until construction works are resumed. Accordingly, the focus on a certain quarter will give inaccurate impression about Aslak.

Aslak depends on product diversification and focus on certain activities and products that deliver higher proceeds, Alamir noted, affirming that Aslak’s strategy has started paying off.

On the other hand, Alamir expected Q1 2023 to see some local and global challenges in several sectors, due to the political conditions arising from the Russian-Ukraine war, and the impact of Chinese measures on the COVID-19 variants. Moreover, higher interest rates weighed largely on cash cost and businesses.

The discussions made by the Real Estate Future Forum participants underlined overprices, which impacted demand. Meanwhile, the data issued by the Saudi Central Bank (SAMA) showed a decline in mortgage loans by commercial banks, Alamir added, pointing to a recession in the construction sector from the second half of 2022.

The CEO expected the building and construction sector to see tough time in 2023 amid a drop in raw material prices, compared to the previous year, which will in turn affect sales. He added that the company aims to increase sales volumes and maintain margin levels, despite input cost changes.

In 2023, Aslak aims to enhance its presence in the building and construction sector through expanding in new activities, such as aggregates and fencing products as well as the opening of new retail branches and boosting the production capacity of high-margin products. This will drive the company’s profit margins amid an expected rise in demand during H2 2023, thanks to mega projects in major cities and the Vision 2023 projects.

On the memorandum of understanding signed with A-1 Fence DMCC Co., Alamir said the agreement is in final stages. Aslak seeks to finalize the measures with the General Authority for Competition (GAC) and get other necessary approvals.

Details will be announced soon, he concluded.

Aslak reported a net profit after Zakat and tax of SAR 57.3 million for 2022, an increase of 24% from SAR 46.2 million a year earlier. The fourth-quarter net profit stood at SAR 12 million, Argaam earlier reported.