JEDDAH — The Middle East Paper Co. (MEPCO), the region’s leading vertically-integrated paper manufacturer, has announced its interim financial results for the six months ended June 30, 2018. Net profit of SR57 million in the first half increased by 166% on H1 2017.

Stabilization of pricing trends since Q3 2017, with global containerboard pricing currently robust.

Improved demand in global markets, as well as increased product diversification is directly and positively impacting profitability.

Further cost optimization measures have continued to positively impact performance.

Eng. Sami Safran, Chief Executive Officer, said: “We are pleased to announce continued improvement in year-on-year performance and we are also comfortable with our performance in Q2. On a YTD basis, operating and financial performance is very much on track and according to plan. Improved sales revenues have primarily been driven by stabilized market pricing, which has occurred since Q3 2017, along with a higher level of product diversification, which has positively influenced profitability. Demand for containerboard locally, in MENA and internationally continues to grow. Recently, we have allocated higher volumes to the local market, which is now 59% of total sales as compared with 54% in the first half of 2017.”

Total sales of SR444 million in H1 2018, as compared with SR353 million in H1 2017 improved by 25.6% on a year-on-year basis. In Q2 2018, total sales of SR219 million declined slightly from SR225 million in Q1 2018, representing a decrease of 2.9%. Consolidated sales volumes decreased slightly on a year-on-year and quarterly basis, due to volume decreases for the subsidiary WASCO. Drivers for improved year-on-year sales performance include a stabilized international and regional pricing environment and increased allocation to non-export distribution.

Ongoing cost optimization efforts have continued to positively impact performance across the manufacturing process. Meanwhile, the activation of newly introduced SAP systems across business verticals and subsidiaries has improved the structural and operating efficiency of the company.

Sales revenue of SR444 million in H1 2018 increased 25.6% from H1 2017 and decreased slightly by 2.9% on the first quarter. Improved year-on-year performance was driven primarily by increases in prices and adjusted sales mix. Gross profit of SR125 million in H1 2018 increased 62.4% from H1 2017 and by 1.6% on the first quarter. Improved performance was driven primarily by successful cost calibration. Operating profit of SR72 million in H1 2018 increased by 94.6% from H1 2017 and increased by 4% on the first quarter, mainly due to an increase in non-conventional product sales to constitute 33% of total sales (up from 25% in H1 2017). MEPCO achieved a net profit of SR57 million in H1 2018, a steep improvement of 166% on H1 2017 and an increase of 3% on the previous quarter. Basic and diluted earnings per share (EPS) of SR1.14 for H1 2018 improved from SR0.43 in H1 2017.

Dr. Mohamed Saleh Darweesh, Chief Financial Officer, said: “We are now seeing a tangible impact from our cost optimization program. In addition, the restructuring and improved efficiency of our production processes, driven partly by the roll-out of our SAP systems, is directly benefitting financial reporting. In terms of our debt position, we have successfully reduced our borrowing levels by SR81 million as compared with H1 2017. This is an important achievement in a rising interest rate environment. We have successfully reduced our cost of financing through favorable lending terms, despite increased average SAIBOR rates. We will continue to work on reducing our debt levels and improving our Debt-to-Equity ratio, which currently stands at 0.91.”

— SG