Saudi Cable eyes profitability in 2020 on negotiations with lenders

Saudi Cable Co. (SCC) is likely to finance its working capital in three months after completing negotiations with potential lenders.

The move will help SCC swing to profitability and record operating profit by 2020, Chairman Meyassar Nowailati told Argaam in an interview on Thursday.

The cable manufacturer’s Q1 2019 results do not fully reflect its turnaround strategy, which needs more time to achieve profitability.

The first-quarter losses were attributed to losses from affiliates overseas as well as lack of working capital finance, which led to a decline in production.

“The strategic plan will be implemented in three years. We cannot secure loans ahead of repaying debt. We cannot raise capital before overcoming the shortage of working capital finance,” Nowailati said.

Saudi Cable’s strategy, which was developed in early 2018, targeted repayment of debt that exceeded SAR 1.8 billion, but was finally reduced to SAR 260 million.

In addition, SCC’s confirmed purchase orders cover the next four to six months, but the lack of working capital finance impacted finalizing these orders.

“The company is in talks with GCC and foreign banks to secure the optimum finance for its projects,” Nowailati added, noting that alternative plans will be developed to enhance SCC’s internal resources such as capital hike.

Other options include strategic partnerships with local or foreign investors to resume operations in secondary production segments or secure the raw materials required for production.

Meanwhile, Nowailati added he expects the negative impact of affiliates’ results to recede significantly by the end of 2019.

“We’re in talks with our partners overseas and have conducted studies to evaluate the company’s operations. We expect Midal Cables Limited to offset last year’s one-off losses. Our investments in Turkey are also expected to pay off,” he noted.

For debt settlements, by the end of 2018, the company had exposure to three banks only. A settlement was reached with two banks.

“We’re still in talks with the remaining banks to restructure the debt over a longer time and help the company repay the debt in full after recovery,” he said.

SCC widened its net loss after zakat and tax by 54 percent year-on-year to SAR 32.4 million in the first quarter of 2019.