Al Jouf Cement probes irregularities involving 3 ex-board members

Al Jouf Cement Co.'s plant

Al Jouf Cement Co. identified suspected financial and administrative irregularities involving three former board members. The company appointed a specialized audit firm to examine financial transactions and contracts that may include violations or irregularities affecting its performance in past periods.

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In a statement to Tadawul, Al Jouf Cement said the appointed auditor is conducting a thorough review of all relevant financial transactions and contracts from the company's stock market listing until mid-2022.

The auditor's report has detailed findings on two cases involving projects related to employee housing and a company road, as well as dealings with related parties.

The report found that contracts for the two projects—employee housing and the factory's private road—were signed without obtaining the necessary approvals from the authorized parties.

Board members, who were authorized to approve such contracts, did not provide the necessary authorizations for agreements with the companies undertaking these projects.

Under the terms of the direct contracts, Al Jouf Cement’s approval was mandatory for any work or agreements assigned to subcontractors. However, the audit revealed no evidence of such approvals in the reviewed documentation, and subcontractor agreements were unavailable for examination.

A connection with a related party, Al-Ta’affuf Co., was identified. This relationship was not disclosed to the board, and necessary approvals for its activities were not obtained.

Certain payments to subcontractors were made by Al Jouf Cement without any official supporting documentation.

Subcontracted projects worth SAR 85.15 million were executed without obtaining the company's approval for subcontractors, as required under contractual terms. Additionally, a project awarded to a main contractor was transferred to a subcontractor at a value of SAR 98.64 million. This transfer showed discrepancies, with a SAR 13.48 million difference between the main contractor's and subcontractor's project values.

The audit also revealed that executive members, including the former chairman, had invested the company’s funds in activities not outlined in its bylaws.

Al Jouf Cement's funds were also invested with related parties, such as the Kasab Real Estate Fund, for 13 years. These investments were concealed, and related information was removed from the company’s records, resulting in losses exceeding SAR 2 million.

The audit team uncovered instances where companies with no commercial activity gained access to Al Jouf Cement’s funds without justification. This was facilitated by executive members with decision-making authority. Examples include Noor Al-Balkan Co. and Abar Al-Jusoor Co., with an estimated total impact of over SAR 50 million on company funds and shareholder equity.

The company also failed to secure adequate guarantees to protect shareholder rights for investments in new ventures and other companies that lacked financial statements to assess their positions.

Moreover, the report found that executive members failed to obtain board or general assembly approvals for contracts involving related entities, including Kasab Real Estate, Noor Al-Balkan, and Abar Al-Jusoor.

The auditor flagged instances where projects were awarded to companies owned by related parties without technical evaluations. When these projects faced challenges, no penalties or corrective actions were imposed. One such case involved Arab Mining Co.

The audit process is ongoing, with continuous coordination between the auditor and the company’s management. Once the review of each suspected case is completed, Al Jouf Cement will disclose the findings to shareholders, the statement added.

The company emphasized that the current financial statements remain unaffected. Al Jouf Cement reaffirmed its commitment to transparency and pledged to take all necessary measures to protect the interests of shareholders and the company.

Any updates or regulatory actions will be announced in due course, the company noted.