United Wire Factories Co. (Aslak) was highly-selective in managing the process of raw materials procurement to seize good opportunities, which in turn boosted profit margins and improved financial results, CEO Nabil Alamir told Argaam in an exclusive.
“The global prices of raw materials started to see an unprecedented rise in Q4 2020, particularly steel prices, due to customers’ need for storage to cushion against potential hikes,” Alamir explained.
Aslak was keen to continue the availability of its products, amid expectations that markets will rebound after the COVID-19 lockdowns. The company maintained high production, backed by demand, with costs steeply declining, which improved profit margins, Alamir added.
Profit margins in the third quarter of 2020 were better when compared to the previous quarters. This coincided with the onset of raw materials price hikes, he added, noting that the third quarter is usually “quiet” amid summer vacations and the departure of employees.
Moreover, demand saw a significant increase as business activities improved following the end of COVID-19 curfew. The pent-up demand witnessed ahead of the tripled value-added tax (VAT) also was higher than expected, Alamir underlined.
Demand at the beginning of this year was slow, after restrictions were imposed on some provinces, especially in Riyadh amid suspended construction works in some provinces, due to the reorganization adopted by the Saudi government. Meanwhile, the purchases witnessed at the end of 2020, driven by customers’ need for storage to avoid price hikes, reduced purchasing through mediators.
Aslak deals with the Ministry of Housing projects through mediators, Alamir added, noting that construction projects of retail customers are slow, as this industry needs catalysts.
Workers in the construction industry need to adapt to changes, following the new real estate transactions tax and the new law, which helps real estate developers redeem tax on construction inputs.
“Housing projects are still deemed the main driver in this [construction] sector, along with other giga-projects, which saw the beginning of groundworks, but they will take time to significantly reflect on the industry,” he affirmed.
Alamir said that the Saudi Crown Prince’s statements about the Riyadh city strategy and development projects created a momentum, expecting the move to boost building and construction activities.
The steel wire producer posted a net profit of SAR 62.1 million for the fiscal year 2020, compared to a net profit of SAR 22.1 million a year earlier, Argaam reported.
