- Sales volumes and average selling prices continue to increase, leading to an increase in gross margin during the period
- Cost rationalization initiatives lead to a significant improvement in operating profit
- Capital optimization through free shares, aiming to return value to shareholders
- A healthy project pipeline should provide a solid foundation for sustained performance improvement in the future
Dammam, Saudi Arabia: East Pipes Integrated Company for Industry (“East Pipes” or “the Company”, 1321 on the Saudi Stock Exchange), Saudi Arabia’s leading manufacturer of Helical Submerged Arc Welded (HSAW) pipes, announced today today its financial results for the second quarter and first six months ended September 30, 2022 (“2Q and 1H-FY23”), showing growing profit, mainly driven by a strong revenue performance resulting from a increased sales volumes complemented by higher average selling prices.
Financial Highlights for 2T and 1H-FY23
- Revenue of SAR 303 million increased by 47% quarter-on-quarter and 150% year-on-year (1Q-FY23: SAR 206 million; 2T-FY22: SAR 121 million), as sales volumes improved significantly during the period, as well as average selling prices, supported by increased activity in the market and with the completion of significant projects by the Company. For 1H-FY23, revenue was SAR 509 million, up 88% year-on-year due to higher sales volumes.
- Gross profit of SAR 15 million increased by 65% year-on-year (2Q-FY22: SAR 9 million) mainly due to a recovery in sales volumes and average realized sales prices compared to last year. East Pipes’ strong, longstanding relationships with key suppliers around the world have positioned the company to successfully execute its backlog. On a sequential basis, gross margin decreased by 21% (1Q-FY23: SAR 19 million), due to an increase in the Company’s raw material cost in 2Q-FY23. For 1H-FY23, gross margin totaled SAR 34 million, an increase of 66% year-on-year, positively impacted by a volume and price effect.
- EBITDA increased 10% quarter-on-quarter and 154% year-on-year to SAR20 million (1Q-FY23: 18 million; 2Q-FY22: SAR8 million), primarily due to improved revenue performance business and lower SG&A expenses. 1H-FY23 followed a similar trend, with EBITDA amounting to SAR 38 million, representing a 40% year-on-year increase.
- EBITDA margin was 6.5% for 2T-FY23 (1T-FY23: 8.7%; 2T-FY22: 6.4%), and 7.4% for 1H-FY23, versus 9.9% for 1H -FY22, thanks to a stronger project pipeline and improved activity levels.
- Net profit after zakat and income tax of SAR 9 million increased by 48% QoQ (1Q-FY23: SAR 6 million; 2Q-FY22: net loss of SAR 0.9 million), due to the return of market activity, which led to a strong recovery in sales volumes during the period. In addition, East Pipes’ early settlement of some of its ongoing facilities enabled the company to reduce financial charges by 25% year-on-year in Q2, despite SAIBOR’s upward trend. For 1H-FY23, net profit increased to SAR 15 million from SAR 1.3 million.
- Cash and cash equivalents decreased by 3% year-to-date to SAR 71 million (31 March 2022: SAR 74 million) due to the early settlement of a significant portion of outstanding debt, in order to effectively manage financial charges of the company, given the current upward trend of SAIBOR.
- Total borrowings increased by 20% since the beginning of the year, from SAR 274 million to SAR 328 million.
- Capital increase by free shares recently approved at the EGM, whereby shareholders received 1 share for 2 shares held. As a result, East Pipes’ total number of shares increased from 21 million shares to 31.5 million shares, with a corresponding increase in paid-up capital from SAR 210 million to SAR 315 million. The recommendation to issue free shares is in line with the Company’s desire to optimize its capital structure while restoring value to its shareholders.
- Continue to pursue several large-scale projects of key strategic business partners.
- Integrated and advanced manufacturing facilities, high quality product offeringsas good as big scale of operations remain the main competitive advantages of the company.
- Supported quality execution on key projects and industry–leading yield on raw materials.
- Increased focus on ESG, with a comprehensive review of the company’s sustainability framework.
Mohammad Al Shaheen, Chief executive officer at Eastern Pipes said:
“It is with great pleasure that we report an increase in profit in 2Q-FY23. This result was largely justified by the implementation of various optimization measures and reinforced by our strong positioning as a leading manufacturer in the domestic market.
We continued to focus on providing distinctive product offerings to our customers and, by capitalizing on our relationships with key business partners, we were able to weather the impact of global supply chain disruptions. Driven by our ability to execute effective pricing strategies and increase sales volumes, we witnessed remarkable gross margin improvement during the period.
East Pipes will move forward securing a greater share of the market as our pipeline of upcoming projects will provide a solid foundation for improved profitability in the future. This, combined with our operational excellence and deep technical expertise, should support the future prospects of the business.
Mohamed Darweesh, Chief Financial Officer at Eastern Pipes said:
“East Pipes reported strong financial results in 2Q-FY23, with improved earnings, demonstrating the company’s strong competitive positioning in the market.
This performance is primarily the result of leveraging the key strengths of our organization, which have enabled us to deliver innovative products to our broad customer base, while maintaining cost discipline and improving our manufacturing efficiency.
Going forward, the foundations for sustainable value creation will be a priority for the Company as we continue to build our backlog, with large-scale projects under Vision 2030 coming to fruition. We remain proactive in expanding our footprint, through the use of our integrated partnerships with key market stakeholders, which will strategically position East Pipes for the growth phase ahead.
Strategy and outlook
Demand for HSAW pipes is expected to continue to grow over the next few years, supported by national initiatives, including those under Vision 2030, which will see mega-projects in the water, oil and gas sectors come to market.
Leveraging its pioneering position in the Saudi HSAW pipe market, East Pipes aims to maximize its market reach and increase market share, by diversifying its product offerings and improving its marketing initiatives. The Company intends to pursue more and more opportunities in the water and oil and gas sectors, where management foresees promising potential. East Pipes is committed to advancing its R&D capabilities to enhance product innovation in line with changing customer demands. Additionally, the company is revamping its sustainability framework to align with industry best practices.
Balance sheet optimization will continue to be at the forefront, with leverage, operational costs and working capital being closely monitored, in order to dilute the impact of the expected increase in financial charges, due to the rise in prevailing interest rates.
East Pipes believes it is well positioned to take full advantage of ongoing megaprojects to significantly expand its backlog, with the ultimate goal of delivering long-term sustainable value to shareholders and stakeholders.
About East Pipes:
Founded in 2010, East Pipes Integrated Company for Industry (East Pipes) is one of the leading manufacturers of Spiral Spiral Arc Welded (HSAW) pipes in Saudi Arabia, which are used in critical infrastructure sectors, mainly water and oil and gas applications. With its state-of-the-art manufacturing capabilities and fully integrated business model, which includes a dual assembly plant and a coating plant, the Company is capable of producing over 500,000 metric tons of tubing. spiral per year, making it one of the largest integrated spiral tube manufacturers in the region.
Contact: [email protected]
This communication has been prepared by East Pipes Integrated Company for Industry (“East Pipes”) and reflects management’s current expectations or strategy regarding future events subject to known and unknown risks and uncertainties. Certain of the statements contained in this communication constitute “forward-looking statements” that do not relate directly or exclusively to historical facts. These forward-looking statements reflect East Pipes’ current intentions, plan, expectations, assumptions and beliefs regarding future events and are subject to risks, uncertainties and other factors, many of which are beyond East Pipes’ control. Blowjobs.
Important factors that could cause actual results to differ materially from the expectations expressed or implied by the forward-looking statements include known and unknown risks. East Pipes undertakes no obligation to revise these forward-looking statements to reflect any change in its expectations or any change in circumstances, events, strategy or plans. Because actual results could differ materially from East Pipes’ current intentions, plans, expectations, assumptions and beliefs regarding the future, you are urged to read all forward-looking statements contained in this presentation with care and caution and to seek independent advice when evaluating the investment. decisions regarding East Pipes.