Saudi Arabian Amiantit : News

AMIANTIT WILL INVEST SR 100 MILLION IN THE KINGDOM AFTER RESTRUCTURING FOREIGN INVESTMENT

Engineer Fareed Al-Khalawi, CEO and MD of Amiantit Group announced that the group is planning to introduce new investments of up to SR 100 million into the Saudi market, and to increase the production capacity of the factory, especially in the area of fiber glass pipes. This comes in line with Amiantit plan for restructuring its investments and to expand its businesses, especially in the fields of water production, operation, management and maintenance of potable water and sanitary drainage facilities, and to participate in the privatization programs of water management sector.

In the interview with Al Eqtisadiah, Al Khalawi confirmed the closure of the US factory, saying that the following step is to conclude the deal of selling the factory, which is expected to be completed within this month. Amiantit has already taken a provision approximately SR 107 million to face the potential losses arising from closing the US factory.

We are expecting concluding the selling deal of the US factory to put an end to losses.

Increasing costs of raw materials and energy have affected the company's profitability.

In the beginning, would you please brief us about Amiantit's most important current and future projects?

Amiantit Group is implementing/will implement several current/future projects in accordance with a specific main framework and well-planned objectives. The most important projects of Amiantit are summarized in the following areas: increasing production capacity of the Group's manufacturing plants to fulfill the increasing demand to our products, finalizing Amiantit's strategy of investments restructuring, developing Amiantit's businesses and playing a role in the privatization programs of water management sector.

In the first area, the company is planning to make new investment of more than SR 165 million, through which Amiantit is intending to increase the production capacity in all its factories, especially those of fiber glass pipes.

In the second area, the company is planning to complete its investment restructuring strategy, especially in the international sector. The company has adopted this program in 2007 through selling 70% of its shares in Brazil and Argentina factories, as well as termination of operation in the US factory. Selling process of the US factory is expected to be concluded within this month.

In the third area, Amiantit is seeking to upgrade its businesses in general, and especially in the field of water production, operation, management and maintenance of potable water and sanitary drainage facilities, and to play a role in privatization programs of water management sector. Tawzea, the company equally-owned by Amiantit and SISCO, has won huge infrastructure contracts that continue for 30 years in three industrial estates. The contracts include the usufruct contract for rehabilitation, operation, management and maintenance project of potable water utilities in the 1st Industrial Estate in Jeddah, the usufruct contract for rehabilitation, operation, management and maintenance of potable water utilities and sanitary drainage and irrigation utilities in the 2nd Industrial Estate in Riyadh, in addition to the 1st Industrial Estate. This will undoubtedly support the company's position in the area of water sector development. The upcoming projects will be announced when we actually get them.

Amiantit will focus upon investments in the developing markets and GCC countries

Amiantit has announced earlier the selling of 70% of its share in Brazil and Argentina factories as part of its international investments restructuring strategy. What are the reasons behind such a move? What are the benefits from this deal? The company has restructured its operations during 2005 on international level. How do you view such a restructuring, and what are the most important outcomes of restructuring process?

Amiantit is reviewing its operations and investment plans from time to time, following specific strategy and objectives. Selling Amiantit's shares in Argentina and Brazil factories, as well as terminating activities of the US factory comes in line in line with the Amiantit's plan to restructure its investments, especially in the international sector. This will enable us to achieve several objectives and benefits, which will reflect positively upon the company's sales and profitability. Among the most important objectives and benefits that we are planning to achieve are the following:

To redirect the financial returns generated by the company towards investment in markets targeted by the company in the coming years. These are the developing markets, and especially in Saudi Arabia and the Gulf countries.

To minimize investment risks.

To focus upon the main activities of the company and development of water sector.

Last year, Amiantit has achieved records sales. However, profits were approximately SR 63 million by the end of the third quarter. What are the reasons for such a huge difference between sales and profits figures?

Our sales and profits figures are an obvious indication the success of the approach we are implementing to enhance profits and performance. Since 2005, Amiantit is implementing policy aiming at improving production efficiency, optimal use of operational capacity, reducing expenditures, restructuring investments, and centralizing its activities. As a result, the company achieved operational profits. However, such profits declined mainly because of the loss at the US factory, which was terminated in 2007, and will not affect results of 2008 and subsequent years. The dramatic and sudden increase in the prices of raw materials has negatively affected the company's profitability, and will remain a challenge for all manufacturers in the near future, taking into consideration the increasing global demand for energy and raw materials. However, the results have changed dramatically during 2007, which is revealed from the financial results of the company during the first three quarters of the last year. Net profits reached SR 63.9 million (SR 74 million before Zakat), compared with SR 20.8 million (SR 30.7 million before Zakat) for the same period of 2006, that is an increase of more than 200%. Operational profits increased to approximately SR 229 million, compared with SR 140.8 million for the same period of 2006, that is an increase of 63%. Net profit per share reached 55 Halalas, compared with 18 Halalas per share for the same period of 2006. In addition, taking a provision of SR 107 million to cover the losses of the US factory will not be repeated in the years to come.

What are the expected consequences to Amiantit's policy within the framework of the Government tendency to privatize projects of sanitary drainage sector and the increased spending on infrastructure projects, including water and sanitary drainage sectors? Do you expect that this tendency will help increase the volume of the company's operations in the local market?

We believe that the high incomes in KSA budget and the increased spending on infrastructure projects, particularly water and sanitation projects proposed for implementation, either directly or through the privatization programs, will be giant projects that are expected to directly influence not only the welfare of the citizen, but will also have a positive impact upon businesses related to such projects, including pipe industry and water management programs. As I said earlier, Amiantit will invest approximately SR 100 million in Saudi Arabia to increase and improve productivity, which will empower us to and to keep up with future projects and to maintain Amiantit's leadership.

Amiantit and Gulf One Investment Bank announced the establishment of a strategic partnership in the field of water management and infrastructure projects. What are the objectives of this partnership and what are the anticipated outcomes in terms of business and profitability?

The partnership between Amiantit and Gulf One Investment Bank in the field of water management and infrastructure projects is a strategic step for the two parties, who are both interested in investments in water management. In addition, this strategic partnership is dictated by the nature of long-term water management projects, and relies heavily on the alliances or coalitions with various relevant players. In this regard, Amiantit is studying several investment opportunities, and is negotiating with its strategic partners, not only for building and managing the projects, but also to find appropriate funding through financial engineering in harmony with the business nature of such projects. We realize that Gulf One Investment Bank is a renowned consulting house in this field.

You pointed out that increased costs of energy on the international level has affected Amiantit's operations and factories throughout the world. Do you expect the effects of such rising costs to continue affect the company's activities in the future?

Undoubtedly, the increased cost of energy throughout the world, in addition to the increased demand for raw materials and the limited supply have negatively affected Amiantit's operations, as well as other manufacturers. However, through adoption of certain policies, we are striving to limit this negative effect. We believe we will be able to overcome this crisis in the future when the global markets begin to stabilize and differences between supply and demand minimize.

Amiantit is one of the pioneering industrial companies that have invested in technology sector. What are the most outstanding results that you achieved so far? What are your future expectations in this area?

We believe that Amiantit inclination towards investment in technology was a successful strategic choice. Approximately, 80% of our sales are manufactured using the technologies owned by Amiantit. Not only that, but such investments will enable the company to exist in the targeted markets through licensing international investors to benefit from our technologies. Amiantit currently exists in approximately 18 countries throughout the world. Thanks to the technology licensing policy.