United Wire Factories Co. (Aslak) is operating factories at high rates to balance low demand and maintain economic efficiency to ensure positive operating margins, CEO Nabil Al-Amir told Argaam.
This includes production lines for certain construction sector products, he added.
The company reduced its focus on the construction sector due to weak sales margins given the weakening demand from the residential sector. Meanwhile, developers are shifting towards alternative products such as precast walls and new building technologies, the CEO said.
He highlighted that iron coil prices (the main raw material for the company’s wire products) were relatively stable quarter-on-quarter in Q2 2024, with slight increases in the prices of reinforcing steel.
Al-Amir expected prices to remain within close ranges. This is despite the global market changes affecting iron prices, such as the Chinese market, not to mention the growing prospect of a US recession and its adverse impact on markets in general.
The CEO also explained that the profit decline in Q2 2024 was due to lower sales year-on-year as a result of weak market demand and the seasonality of the holidays and summer vacation, which also squeezed profit margins due to price competition among manufacturers.
The continued weak market demand for products of various types prevailed during the second quarter of this year, which in turn challenged all manufacturers, according to the top executive.
Elsewhere, he anticipated the company’s return on its investment in A-1 Fence Arabia Co., specialized in manufacturing security fences, to step up in H2 2024.
As for the Saudi market, Al-Amir expected demand to see relative improvement in the third quarter of 2024, amid anticipated indicators of the start of projects related to hosting Expo 2030 and the 2034 World Cup.
The company is currently working to keep pace with the demand from these projects to provide products through its current and future factories, he said.
The CEO also stressed that Aslak is working to explore several opportunities to acquire stakes in top frontrunners in construction-related fields to cater to the expected high demand in the coming years.
Aslak reported a net profit rise of 3% to SAR 10.3 million in the first half of 2024, compared to SAR 10 million in the corresponding period last year. The second-quarter bottom line amounted to SAR 4.2 million, according to data available with Argaam.
