TALCO holds significant shares in aluminum forming, powder coating sectors in Saudi Arabia, GCC

Logo of Al Taiseer Group Talco Industrial Co. (TALCO)

Al Taiseer Group Talco Industrial Co. (TALCO) is bracing for offering its shares to the public in the Main Market. The company has issued a prospectus to float 30% of its share in an initial public offering (IPO). A market study conducted on November 6, 2023, indicated that the company holds significant production shares in Saudi Arabia and the GCC countries across most of the sectors where it operates. Its share of aluminium forming production reaches 23%, while its share in the powder coating sector is 21%, and it holds a 60% share in the leakage prevention products sector.

TALCO was established in 1976 and began its operations in the aluminium sector by founding Al Taiseer Aluminium Factory in Riyadh. With several expansion operations, the factory's annual production capacity increased from 10,000 metric tons in 1994 to 20,000 metric tons in 2000.

The company currently operates six factories/production facilities—four in Riyadh and two in Jeddah—with an annual production capacity of 60,000 metric tons by the end of June 2023 for the aluminium sector - the largest sector in the company. Additionally, it has main warehouses for storing and distributing products in Riyadh, Jeddah, Dammam, and Dubai.

The company's sales within the Kingdom had the largest contribution to total sales, representing 77.9% in 2023. TALCO’s sales are mainly concentrated in Riyadh, then in other cities of the Kingdom. The company also exports its products to more than 26 countries, including the GCC countries, the MENA region, East Asia, Australia, the US, and Europe, with sales outside the Kingdom accounting for 22.1% of its total revenues during the year 2023.

The following figure illustrates TALCO’s key business segments:

Overview of TALCO’s business in the aluminium segment

The company designs, manufactures and markets a diverse range of aluminium products to a broad number of customers. This segment includes aluminium extrusions (various aluminium alloys) mill finish, anodized aluminium, powder coated aluminium, anodic treatment-powder coated aluminium (seaside), PVDF coating (liquid coating), wood finished aluminium (real wood), wood-finished aluminium (Effecta), wood finished aluminium (film sublimation), and thermal break products.

The company records revenues primarily through the manufacturing and sale of aluminium products, reaching SAR 582.7 million in 2023, or 86.8% of the company's total revenues, compared to SAR 652.0 million a year earlier.

Despite the 10.4% fall year-on-year (YoY) in aluminium segment sales in 2023, the segment reported a 6% increase in net profit (before Zakat) to SAR 73.4 million, compared to SAR 69.2 million a year earlier, mainly driven by adopting a strategy that focuses on a customer base and markets to ensure a competitive profit margin.

The following table shows the company’s production capacity in the aluminium segment from 2021 until June 30, 2023:

Source: Company

Aluminium segment overview:

According to a market study, aluminium products are widely used in various sectors, as demand for aluminium sectors in the Kingdom reached about 180,000 tons in 2022. The building and construction sector represents more than 89% of this demand, followed by automotive, transportation, industry, electronics, electricity, and infrastructure sectors.

The following table shows the expected demand for aluminium sectors in the Kingdom as of 2022:

Source: Market study

According to the study, demand for aluminium sectors will likely grow at a compound annual growth rate (CAGR) of 3.9% from 2023 to 2028, supported by growth in the construction sector, investment in mega projects, and diversification in the industrial and automotive sectors.

The infrastructure development plans will help the Kingdom boost its share of demand for aluminium extrusion products to 40% by 2028.

The following table shows the company’s market share in the aluminium sector in 2022:

Source: Market study

The company, through its subsidiary Gulf Polyester Powder Production Co. (Alwan), manufactures and markets a diverse number of powder coating products to a wide range of customers. The thermoset powder coating products segment consists of sub-segments, such as polyester powder, epoxy powder, super durable powder and metallic powder products. Powder coating products are manufactured by Alwan that has five production lines in Riyadh and two lines in Jeddah to produce powder coatings, with a production capacity of 7,400 tons annually of standard polyester powder and hybrid powder products.

As a complementary segment to the company’s operations in the aluminium sector, the company realized revenues from the powder coating segment amounting to SAR 50.7 million, which represented 7.6% of total revenues in 2023, compared to SAR 54.6 million in 2022.

The following table shows the production volume of powder coating lines between 2021 and June 30, 2023:

*Source: The company

Overview of Thermoset Powder Coatings Segment:

According to the market study, the powder coatings sector in the GCC countries, which was worth $378 million in 2022, is expected to grow significantly due to construction, energy, utilities, and general engineering needs. The Kingdom comes with the highest percentage of revenues at 52%, followed by the United Arab Emirates (UAE) with 31%, while the rest of the GCC countries represent 17%. The company led the powder coating sector in the Kingdom with a market share of about 21% of the market size in 2022, followed by Jotun with 18%.

The powder coating sector in the GCC countries is expected to grow at a compound annual growth rate (CAGR) of 4.6% in the period from 2022 to 2028, driven by increased demand for various uses. The following table shows the general competitive landscape for companies producing powder coatings in the Kingdom for 2022:

* Source: Market study.

Overview of TALCO’s business in the accessories products segment

The company, through its subsidiary Al-Fattouh Aluminium Accessories and Isolation Lines Co. (Alfa), designs, manufactures and markets a diverse range of accessory products to a broad client base. This segment includes products such as weatherstrip, polypropylene yarn, strip brush/rubber, rubber gaskets from PVC and TPV, plastic injection moulded components, plastic bags and sheets and printing wrapping films products.

As a complementary segment to the company’s operations, the company generated revenues from the accessories segment of SAR 37.9 million, which represented 5.6% of total revenues in 2023, compared to SAR 43.2 million in 2022.

It is worth noting that despite a 12.3% decrease in sales of the accessories segment in 2023 compared to 2022, the segment maintained stable levels of net profit before Zakat for 2023 and 2022, at approximately SAR 10 million. This proves the company’s ability to maintain profitability levels to ensure its leading position in the sector.

The following table illustrates the production capacity of aluminium accessories segment:

*Source: The company.

Overview of the aluminium accessories segment (especially sealants):

The company has been considered the only manufacturer in the Kingdom specialized in weatherstrips since 1992. The market study showed that the market size is estimated at approximately SAR 72.7 million ($19.4 million) in 2022.

Only a few companies manufacture these products in GCC countries. The market study also indicates an expected growth in the weatherstrips market in the Gulf countries at a CAGR of 5% during the period from 2022 to 2028, driven mainly by increased demand from investment in the manufacturing and automotive sectors in the region to reach a value of approximately SAR 97.9 million ($26.1 million) in 2028.

It is worth noting that the company controls a leading share in the Kingdom and the Gulf countries at a rate of 60%, and exports to many countries.