The fourth quarter of 2023 witnessed stable raw material prices, which eased the pressure on sales margins and thus improved the quarterly results, United Wire Factories Co.’s (Aslak) CEO Nabil Al-Amir told Argaam.
The construction and civil sector products did not report a significant change in the volume of demand for the rest of the year
Al-Amir pointed out that the company’s results are considered good given the difficult conditions endured by the construction sector during the year, especially with lower demand for some products due to several factors.
Weak demand for products led to price competition among manufacturers, which put pressure on sales margins significantly, the CEO added.
He indicated that raw materials of iron rolls and reinforcing bars saw price fluctuation in the first nine months of 2023. This contributed to widening pressure on sales margins, as margins of some products fell to a negative level in certain periods of the year.
As a result, the value of sales dropped by almost double the decrease in sales volumes. This is in an attempt to maintain a balance between production and sales, aiming to absorb fixed costs without significantly affecting margins. This process continued during the year and accurately, almost daily, to monitor any variables, according to Aslak’s CEO.
Commenting on what prompted Aslak’s board to recommend transferring the company’s entire statutory reserve to retained earnings, Al-Amir said this procedure grants flexibility in dealing with the reserve whenever the need arises. This aspect was factored in the board’s proposal at the time in anticipation of any decisions that might require benefiting from this reserve within the retained earnings item.
The board recommendation was put forth closely ahead of the imminent convening of the company’s general assembly, eliminating the need for holding a separate meeting dedicated to voting on the move, the CEO further stated.
He pointed out that Q1 2024 is deemed an extension of the Q4 2023 performance in terms of the demand level, which improved slightly with the stability in raw materials prices.
The CEO expected demand to improve by the end of the holy Ramadan season and by the start of some government and private projects which are set to further support the market.
By the end of 2023, Aslak logged a 64% decline in net profit to SAR 20.4 million, compared to SAR 56.7 million a year ago, Argaam earlier reported.
