SAIC expects more profits from existing investments in 2024: CEO

Abdullah Suleiman Al-Juraish, Managing Director and CEO of Saudi Advanced Industries Co. (SAIC)

Saudi Advanced Industries Co.’s (SAIC) Managing Director and CEO, Abdullah Suleiman Al-Juraish, said that the outcomes of the current management began to manifest in 2023 and the first quarter of 2024, expecting the company to continue generating additional profits through its existing investments for the remainder of the current year.

In an interview with Argaam, Al-Juraish said the company invests in the stock market through funds and portfolios managed by brokerage firms, noting that these diverse investments contributed to the company's first-quarter earnings.

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Al-Juraish went on to say that SAIC actively seeks opportunities in both the main and parallel stock markets, noting that the Nomu-Parallel Market has plenty of promising opportunities poised for significant growth in the near future.

SAIC's investment focus extends beyond the stock market, as the company is actively exploring opportunities in private equity firms and venture capital funds.

Al-Juraish emphasized that SAIC is meticulously evaluating these options to ensure their alignment with shareholder interests and overall feasibility. Any concrete developments on this front will be announced in due course.

The CEO also underscored SAIC's strategic shift towards growth companies, with the aim of investing in these companies to generate stronger profits and achieve financial sustainability. The preferred investment sectors include finance, media, entertainment, insurance, and food.

Al-Juraish elaborated on a recent accounting change as most of the company's recent investments were recorded at fair value in the profit and loss statement, whereas they were previously recorded at fair value through the gross income statement. This shift garnered increased attention from institutional investors and funds, impressed by SAIC's successes, and placed the company under greater scrutiny.

He also highlighted that one of the most significant changes in recognizing investments through profit and loss is the company's intention to leverage the role of short-term investments and investment portfolios.

The CEO elaborated that the company classifies certain investments through the gross income statement as long-term investments, which it does not intend to divest from in the near future. To mitigate the impact of price fluctuations on the retention process, these investments are recorded at fair value through other gross income and do not directly affect the company's income statement.

These are regarded as non-recurring or extraordinary activities and do not impact the profit and loss statement, but they are reflected in the gross income statement and subsequently in the balance sheet.

The objective of recording investments at fair value in the profit and loss statement is to accurately recognize these revenues in the income statement, as they reflect the company's operations optimally.

This approach enables investors to gain a clear understanding of the company's investments and directly benefit from them, Al-Juraish explained, stressing that this expedites the process of announcing financial results immediately after the end of the quarter, except for associates.

He further mentioned that the profit achieved in this quarter constituted around 60%, with the remaining 40% expected to be realized during the second or third quarter of the current year based on fair value at that time. Some investments are anticipated to further grow in accordance with the company's vision to divest from them at the opportune moment.

Al-Juraish stated that the associates’ realized profits did not exceed 3%, or SAR 3.47 million, during the quarter. This will prompt the company to explore other investment channels to enhance revenues and achieve a balanced distribution of risks.

He further explained that the company pursues three different paths in its investments, including long-term investments managed internally. The company holds older strategic investments with Obeikan Glass Co., Masar Al-Numou Finance Co. (Deutsche Gulf Finance previously), and Industrialization and Energy Services Co. (TAQA).

The primary investments include companies listed on the Nomu market, such as Academy of Learning Co. and Balady Poultry Trading Co., along with short-term investments managed by funds and portfolio managers according to the company's directives, the senior official added.

Currently, there are no reclassified investments as the company's strategy in the past period focused on completely restructuring certain investment portfolios and divesting from investments that had achieved their objectives.

The strategy of SAIC and its subsidiary aims to meet liquidity requirements for transferring its associate, Obeikan Glass, to the main market. This move is anticipated to enhance the company's position and achieve SAIC’s objectives since the initiation of the investment in 2008, ultimately positioning Obeikan Glass among the major industrial companies in the main market.

He added that the company sold 4.03 million shares of Obeikan Glass, representing 12.58% of its capital, for a total value estimated at SAR 144.12 million, or SAR 35.8 per share. This resulted in realizing capital gains totaling SAR 64.87 million, and its financial impact will appear during the second quarter of 2024.

The sale proceeds will bolster SAIC’s financial position, provide ample cash liquidity, and support future growth plans, according to Al-Juraish.

The ownership of SAIC and its subsidiary amounted to SAR 11.79 million shares, representing 36.84% of Obeikan Glass's capital before the sale. After the sale, its ownership became 7.76 million shares, representing 24.25% of Obeikan Glass's capital.

The CEO highlighted the significant risks facing the company, emphasizing exposure to financial market fluctuations that could impact profitability, especially since most investments are recorded through the profit and loss statement. However, the company is actively working to mitigate these risks and hedge against them.

In case of solely relying on the results of associates during this period, SAIC would have recorded a quarterly loss, as outcomes are influenced by the products and segments of each company, Al-Juraish added.

He further noted that the rise in interest rates adversely affected Masar Al-Numou, resulting in decreased results. Conversely, despite glass price volatility, Obeikan Glass achieved impressive results in 2021 and 2022, with net profits of SAR 173 million and SAR 177 million, respectively.

However, in 2023, due to lower glass prices, Obeikan Glass' net profit dropped to SAR 64 million. The company successfully navigated such risks, as well as balanced and restructured new investments, which contributed to its overall company stability and growth.

 The proceeds of Obeikan Glass’ deal will greatly contribute to enhancing these investments and increasing returns in the coming period, Al-Juraish said.

He emphasized SAIC's robust financial position, thanks to cumulative efforts from previous administrations and boards of directors, along with continued positive development to serve investor interests.

According to data available on Argaam, SAIC’s profit surged to SAR 108.7 million by the end of the first quarter of 2024, compared to SAR 22.1 million in the same period of 2023.