MEPCO net profit still hurt by fall in global prices: CEO

Sami Al-Safran, CEO of Middle East Paper Co. (MEPCO)

Middle East Paper Co.'s (MEPCO) CEO Sami Al-Safran said the impact of the decline in global prices is still affecting the group's net profit. He indicated that MEPCO is still maintaining the current cost level, despite the high inflation rates, and has taken steps to reduce raw material inventory levels.

Commenting on the company's Q3 2023 results, Al-Safran highlighted that the global prices’ downtrend is slowing down, as the group witnessed a 21% quarter-on-quarter (QoQ) leap in gross sales revenues due to the increase in local demand for the paper packaging sector after national holidays.

Furthermore, sales volume of the paper packaging sector is still stable compared to last year, while revenues of the tissue paper segment began to pick up with the production run rate skyrocketing by 50% at Juthor Paper Manufacturing Co. factory, according to the top executive.

Al-Safran also stated that MEPCO still maintains a high production run rate exceeding 90%, compared to the global average which currently stands at 80%. He pointed out that the drop in profit margins is temporary due to lower global demand for paper packaging, which has weighed on paper companies globally.

However, local demand remains healthy. The continued increase in sales of the tissue paper segment, which is expected to turn to net profit by Q1 2024, will help to partially offset the negative impact of the slump in global paper packaging prices on the group’s overall profitability.

MEPCO reported a net loss of SAR 44.6 million, after minority interest, for th2023, against a net profit of SAR 244.9 million a year earlier. Q3 losses stood at SAR 17.8 million, according to Argaam's data.