Saudi Chemical expects steady growth in military explosives industry, says CEO

Thamer Al-Muhid, Chief Executive Officer at Saudi Chemical Co. (SCC), said profit margins of pharmaceuticals production is much better than pharmaceuticals trade, which is governed by a number of regulations in almost all countries worldwide.

The medical sector is showing positive signs worldwide, as indicated by corporate officials and market experts, which in turn translates to a bullish outlook for the industry, Al-Muhid told Argaam in a telephone interview.

“The current circumstances should not set the sector strategy, but it should rather depend on a deeper and more comprehensive outlook. The competent authorities, including governmental and quasi-governmental entities, are sparing no effort to overcome obstacles and revive the Saudi healthcare sector,” Al-Muhid pointed out.

“There are many initiatives that aim to promote this key sector and place it on par with most developed countries,” he added.

Commenting on Saudi Chemical’s Q3 2020 financial results, Al-Muhid said the solid performance of the healthcare sector, whether pharmaceuticals manufacturing or trade, reported a rise of over 10% in sales, coupled with lower general and administrative expenses. This was supported by the Saudi government support, in addition to cost reduction and optimization, which were achieved through the company’s turnaround program.

Accordingly, costs decreased by 12% in the third quarter of 2020, when compared to last year.  

“Moreover, Saudi Chemical reported a 66% year-on-year decline in the accounts receivable provisions amid better collection. The company also recorded lower finance costs, backed by a decrease in interest rates, when compared to last year,” Al-Muhid added.

Elsewhere, Al-Muhid described the civil explosives segment as key for enabling the mining, cement and infrastructure industries, as the Kingdom enacted the mining investment law this year.

Growth in the cement sector and various projects will reflect positively on higher demand, he said, noting that competition weighed on the sector’s profit margins.

“Saudi Chemical has a strong track record in the civil explosives field since its inception in 1972. The company depends on a team of Saudi professionals, who help train our workers to use explosives at work sites,” Al-Muhid highlighted.

Additionally, civil explosives are widely used in oil exploration activities – a key field for which Saudi Chemical provides special products.

Saudi Chemical’s products are available in Saudi Arabia and neighboring countries.

“Saudi Chemical owns a plant to produce the raw materials required for civil explosives in Egypt, a distinct competitive advantage of the company, which also exports there materials to peers in several countries,” Al-Muhid added.

For military explosives, there was a quality shift in this field following the launch of General Authority for Military Industries (GAMI). “We expect this sector to see steady growth, thanks to its attractive and strong profit margins,” he noted.

However, these profit margins largely depend on supply chains, the cost of doing business and product quality. The Kingdom’s decision to localize this industry in line with Vision 2030 for the military sector boosts confidence in that investment.

In addition, Saudi Chemical’s products are essential for the majority of military and defense industries.

The Tadawul-listed company is working on a comprehensive turnaround plan to improve its services and solutions, and realize shareholders’ ambitions, Al-Muhid concluded.