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Saudi Steel Pipe Co. announces its Interim Financial Results for the Period Ending on 2020-06-30 ( Six Months )

Element ListCurrent QuarterSimilar quarter for previous year%ChangePrevious Quarter% Change
Sales/Revenue 72.63161.85-55.125122.34-40.632
Gross Profit (Loss) -12.380.88-4.49-
Operational Profit (Loss) -28.15-9.6193.229-18.0655.869
Net Profit (Loss) after Zakat and Tax -27.02-10.17165.683-17.7752.054
Total Comprehensive Income -27.02-10.17165.683-17.7752.054
All figures are in (Millions) Saudi Arabia, Riyals
Element ListCurrent PeriodSimilar period for previous year%Change
Sales/Revenue 194.97357.16-45.411
Gross Profit (Loss) -7.8913.41-
Operational Profit (Loss) -46.21-6.99561.087
Net Profit (Loss) after Zakat and Tax -44.79-9.84355.182
Total Comprehensive Income -44.79-9.84355.182
Total Share Holders Equity (after Deducting Minority Equity) 483.27549.6-12.068
Profit (Loss) per Share -0.886-0.195
All figures are in (Millions) Saudi Arabia, Riyals
Accumulated LossesCapitalPercentage %
71.6251014.04
All figures are in (Millions) Saudi Arabia, Riyals
Element ListExplanation
Increase (Decrease) in Net Profit for Current Quarter Compared to the Same Quarter of the Previous Year is Attributed to Net loss of SR (27.02) million for the second quarter of financial year 2020 (“Q2 2020”) compared to a net loss of SR (10.17) million for the second quarter of financial year 2019 (“Q2 2019”) is due to the following main reasons:

a) Gross loss amounting to SR (12.38) million compared to gross profit of SR 0.88 million in Q2 2019, as a result of lower volumes and product mix.

b) Increase in administrative expenses amounting to SR (12.60) million compared to SR (8.35) million in Q2 2019, due mainly to end of service indemnity costs booked in Q2 2020.

c) Decrease in other income amounting to SR 0.19 million compared to SR 1.40 million in Q2 2019, mainly due to a refund and accrual reversals booked in Q2 2019.

d) Increase in trade receivables impairment charges amounting to SR (1.22) million compared to SR (0.59) million in Q2 2019.

The above listed adverse changes were partially offset by the increase in share of profit in an affiliate (Global Pipes Company) amounting to SR 3.58 in Q2 2020 compared to SR 1.75 million in Q2 2019 , as well as a decrease in selling, marketing and distribution expenses amounting to SR (2.14) in Q2 2020 compared to SR (2.94) million in Q2 2019.

SSP recorded a negative EBITDA of SR (16.95) million in Q2 2020, including non-recurring charges, compared to a positive EBITDA of SR 1.60 million in Q2 2019. Excluding non-recurrent charges, adjusted EBITDA is SR (11.75) million in Q2 2020. These results have been impacted by the effects of the COVID-19 pandemic. In particular, during April and May 2020, the lockdown imposed on Qatif and Dammam 2nd Industrial City (where the Company’s facilities are located) and the resulting restrictions imposed on the mobility of workforce and on the activity in the industrial facilities, had a significant impact on the company’s operation. However, as at the date of issuing these financial statements, the Company’s industrial facilities are operating back at normal pre-COVID-19 levels.

In order to mitigate the impact of the expected lower sales and production caused by the COVID-19 pandemic, the company implemented several actions to optimize structural costs and preserve cash by focusing on reducing working capital and capital expenditures while delivering on efficiency opportunities without compromising the long-term strategic goals of the company. As a result, SSP recorded positive free cash flows of SR 30.24 million in Q2 2020, compared to free cash flows of SR 28.88 million in Q2 2019.

Increase (Decrease) in Net Profit for Current Quarter Compared to the Previous Quarter is Attributed to Net loss of SR (27.02) million for Q2 2020 compared to a net loss of SR (17.77) million for first quarter of financial year 2020 (“Q1 2020”) is due to the following main reasons:

a) Gross loss amounting to SR (12.38) million compared to gross profit of SR 4.49 million in Q1 2020, as a result of lower volume and product mix.

b) Decrease in net zakat and income tax benefit amounting to SR 0.06 million compared to SR 3.40 million in Q1 2020, mainly as a result of booking a zakat expense in Q2 2020.

c) Increase in trade receivables impairment charges amounting to SR (1.22) million compared to SR (0.75) million in Q1 2020.

The above listed adverse changes were partially offset by the decrease in administrative expenses amounting to SR (12.59) million compared to SR (18.77) in Q1 2020, and the decrease in selling, marketing and distribution expenses amounting to SR (2.14) million compared to SR (3.00) million in Q1 2020. In addition, share of profit in an affiliate (Global Pipes Company) increased to SR 3.58 million compared to SR 0.04 million in Q1 2020.

SSP recorded a negative EBITDA of SR (16.95) million in Q2 2020, including non-recurring charges, compared to an EBITDA of SR (6.9) million in Q1 2020. Excluding non-recurring charges, adjusted EBITDA is SR (11.75) million in Q2 2020. These results have been impacted by the effects of the COVID-19 pandemic. In particular, during April and May 2020, the lockdown imposed on Qatif and Dammam 2nd Industrial City (where the Company’s facilities are located) and the resulting restrictions imposed on the mobility of workforce and on the activity in the industrial facilities, had a significant impact on the company’s operation. However, as at the date of issuing these financial statements, the Company’s industrial facilities are operating back at normal pre-COVID-19 levels.

In order to mitigate the impact of the expected lower sales and production caused by the COVID-19 pandemic, the company implemented several actions to optimize structural costs and preserve cash by focusing on reducing working capital and capital expenditures while delivering on efficiency opportunities without compromising the long-term strategic goals of the company. As a result, SSP recorded positive free cash flows of SR 30.24 million in Q2 2020 compared to negative free cash flows of SR (35.4) million in Q1 2020.

Increase (Decrease) in Net Profit for Current Period Compared to the Similar Period of the Previous Year is Attributed to Net loss of SR (44.79) million for the first half of financial year 2020 (“1H 2020”) compared to a net loss of SR (9.84) million for the first half of financial year 2019 (“1H 2019”) is due to the following main reasons:

a) Gross loss amounting to SR (7.89) million compared to gross profit of SR 13.41 million in 1H 2019, as a result of lower volumes and product mix.

b) Increase in administrative expenses amounting to SR (31.36) million compared to SR (15.44) million in 1H 2019, due mainly to end of services indemnities costs booked in 1H 2020.

c) Decrease in other income amounting to SR 0.16 million compared to SR 1.68 million in 1H 2019, mainly due to a refund and accrual reversals booked in 1H 2019.

d) Increase in trade receivables impairment charges amounting to SR (1.97) million compared to a reversal of SR 0.03 million in 1H 2019.

e) Decrease in share of profit in an affiliate (Global Pipes Company) amounting to SR 3.61 million in 1H 2020 compared to SR 4.81 million in 1H 2019

The above listed adverse changes were partially offset by a decrease in selling, marketing and distribution expenses amounting to SR (5.15) million in 1H 2020 compared to SR (6.67) million in 1H 2019, an increase in net zakat and income tax benefit amounting to SR 3.46 million compared to an expense of SR (0.09) million in 1H 2019, as well as a reduction in financial charges amounting to SR (5.65) million in 1H 2020 compare to SR (7.56) million in 1H 2019.

SSP recorded a negative EBITDA of SR (23.86) million in 1H 2020, including non-recurring charges, compared to a positive EBITDA of SR 15.50 million in 1H 2019. Excluding non-recurrent charges, adjusted EBITDA is SR (8.34) million in 1H 2020. These results have been impacted by the effects of COVID-19 pandemic. In particular, during April and May 2020, the lockdown imposed on Qatif and Dammam 2nd Industrial City (where the Company’s facilities are located) and the resulting restrictions imposed on the mobility of workforce and on the activity in the industrial facilities, had a significant impact on the company’s operation. However, as at the date of issuing these financial statements, the Company’s industrial facilities are operating back at normal pre-COVID-19 levels.

Basis of the External Auditor's Opinion Emphasis of Matter paragraph
Modification, Qualification or Emphasis of a Matter as Stated within the External Auditor Opinion Without qualifying our opinion, we draw attention to Note 2 to the accompanying consolidated financial statements; where the accumulated losses of TSM Arabia (the subsidiary) as at June 30, 2020 have exceeded its share capital by SR 141.3 million (December 31, 2019: SR 140.2 million). Furthermore, the Board of Directors of the Company has passed a resolution to provide sufficient financial support to enable TSM Arabia to meet its financial obligations as and when they fall due. Accordingly, the subsidiary’s financial statements were prepared on a going concern basis. Additionally, the subsidiary was in breach of its loan facilities financial covenants. The management of the subsidiary is in the process of taking the necessary remedial actions to resolve the breach including obtaining the required waiver documents. Accordingly, the loans continue to be classified as per their original terms of payment
Reclassification of Comparison Items Certain comparative figures for year 2019 have been reclassified to conform to the presentation in the current period.
Additional Information Refer to Note 14 of the interim financial statements for more information on the impact of COVID-19 on the Company’s operations and management action plan to mitigate its impact.

The Capital Market Authority and the Saudi Stock Exchange take no responsibility for the contents of this disclosure, make no representations as to its accuracy or completeness, and expressly disclaim any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this disclosure, and the issuer accepts full responsibility for the accuracy of the information contained in it and confirms, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts or information the omission of which would make the disclosure misleading, incomplete or inaccurate.

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