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Saudi Steel Pipe Co. announces its interim Financial results for the period ending on 30-9-2020 (Nine Months)

Element ListCurrent QuarterSimilar quarter for previous year%ChangePrevious Quarter% Change
Sales/Revenue 156.55157.8-0.79272.63115.544
Gross Profit (Loss) 23.320.1317,838.461-12.38-
Operational Profit (Loss) 13.12-12.24--28.15-
Net Profit (Loss) after Zakat and Tax 9.58-14.12--27.02-
Total Comprehensive Income 10.72-14.12--27.02-
All figures are in (Millions) Saudi Arabia, Riyals
Element ListCurrent PeriodSimilar period for previous year%Change
Sales/Revenue 351.52514.96-31.738
Gross Profit (Loss) 15.4213.5413.884
Operational Profit (Loss) -33.09-19.2372.074
Net Profit (Loss) after Zakat and Tax -35.21-23.9646.953
Total Comprehensive Income -34.07-23.9642.195
Total Share Holders Equity (after Deducting Minority Equity) 493.99535.48-7.748
Profit (Loss) per Share -0.697-0.474
All figures are in (Millions) Saudi Arabia, Riyals
Accumulated LossesCapitalPercentage %
-62.0451012.17
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 profit of SR 9.58 million for the third quarter of financial year 2020 (“Q3 2020”) compared to a net loss of SR (14.12) million for the third quarter of financial year 2019 (“Q3 2019”) is due to the following main reasons:

a) Gross profit amounting to SR 23.32 million compared to SR 0.13 million in Q3 2019, as a result of higher volumes and improved product mix.

b) Other income amounting to SR 0.11 million compared to other expenses amounting to SR (1.59) million in Q3 2019.

c) Decrease in selling, marketing and distribution expenses amounting to SR 2.16 compared to SR 3.60 million in Q3 2019.

d) Increase in trade receivables impairment reversal amounting to SR 0.99 million compared to SR 0.54 million in Q3 2019.

The above listed positive changes were partially offset by the increase in administrative expenses amounting to SR 9.13 million compared to SR 7.71 million in Q3 2019, due mainly to end of service indemnity costs booked in Q3 2020, increase in zakat and income tax expense amounting to SR 1.86 million compared to SR 0.04 million in Q3 2019.

The EBITDA represent earnings before interest, tax, depreciation and amortization. Adjusted EBITDA excludes non-recurrent charges.

The Company ramped up its operations in Q3 2020 after lifting the lockdown measures imposed during Q2 2020 on Qatif and Dammam 2nd Industrial City (where the Company’s facilities are located) which had a significant impact on the company’s operation and results. In addition, the Company implemented several actions to optimize structural costs and preserve liquidity while delivering on efficiency opportunities without compromising its long-term strategic goals. As a result, SSP recorded a positive EBITDA of SR 24.41 million in Q3 2020, including non-recurring charges, compared to a negative EBITDA of SR (1.15) million in Q3 2019. Excluding non-recurrent charges, adjusted EBITDA is SR 27.94 million in Q3 2020.

SSP recorded negative free cash flows of SR (78.49) million in Q3 2020, compared to SR (51.62) million in Q3 2019, mainly as a result of the increase in working capital due to the ramp up in the level of activity.

Increase (Decrease) in Net Profit for Current Quarter Compared to the Previous Quarter is Attributed to Net profit of SR 9.58 million for Q3 2020 compared to a net loss of SR (27.02) million for second quarter of financial year 2020 (“Q2 2020”) is due to the following main reasons:

a) Gross profit amounting to SR 23.32 million compared to a gross loss of SR (12.38) million in Q2 2020, as a result of higher volumes and improved product mix.

b) Decrease in administrative expenses amounting to SR 9.13 million compared to SR 12.60 million in Q2 2020, due mainly to lower end of service indemnity costs booked in Q3 2020.

c) Trade receivables impairment reversal amounting to SR 0.99 million compared to a charge of SR (1.22) million in Q2 2020.

The above listed positive changes were partially offset by zakat and income tax expense amounting to SR (1.86) million compared to a credit of SR 0.06 million in Q2 2020, increase in financial charges amounting to SR 3.10 million compared to SR 2.51 million in Q2 2020. In addition, share of profit in an affiliate (Global Pipes Company) decreased to SR 1.41 million compared to SR 3.58 million in Q2 2020.

The EBITDA represent earnings before interest, tax, depreciation and amortization. Adjusted EBITDA excludes non-recurrent charges.

The Company ramped up its operations in Q3 2020 after lifting the lockdown measures imposed during Q2 2020 on Qatif and Dammam 2nd Industrial City (where the Company’s facilities are located) which had a significant impact on the company’s operation and results. In addition, the Company implemented several actions to optimize structural costs and preserve liquidity while delivering on efficiency opportunities without compromising its long-term strategic goals. As a result, SSP recorded a positive EBITDA of SR 24.41 million in Q3 2020, including non-recurring charges, compared to a negative EBITDA of SR (16.95) million in Q2 2020. Excluding non-recurrent charges, adjusted EBITDA is SR 27.94 million in Q3 2020.

SSP recorded negative free cash flows of SR (78.49) million in Q3 2020, compared to a positive SR 30.24 million in Q2 2020, mainly as a result of the increase in working capital due to the ramp up in the level of activity.

Increase (Decrease) in Net Profit for Current Period Compared to the Similar Period of the Previous Year is Attributed to Net loss of SR (35.21) million for the nine months period of financial year 2020 (“current period”) compared to a net loss of SR (23.96) million for the nine months period of financial year 2019 (“similar period of year 2019”) is due to the following main reasons:

a) Increase in administrative expenses amounting to SR 40.49 million compared to SR 23.16 million in the similar period of year 2019, due mainly to end of services indemnities costs booked in current period.

b) Trade receivables impairment charges amounting to SR (0.99) million compared to a reversal of SR 0.57 million in the similar period of year 2019.

c) Decrease in share of profit in an affiliate (Global Pipes Company) amounting to SR 5.02 million in the current period compared to SR 6.12 million in the similar period of year 2019.

The above listed adverse changes were partially offset by the following:

a) Decrease in selling, marketing and distribution expenses amounting to SR 7.30 compared to SR 10.28 million in the similar period of year 2019.

b) Decrease in financial charges amounting to SR 8.75 million compared to SR 10.72 million in the similar period of year 2019.

c) Increase in gross profit amounting to SR 15.42 million compared to SR 13.54 million in the similar period of year 2019.

d) Zakat and income tax benefit amounting to SR 1.60 million compared to an expense of SR (0.13) million in the similar period of year 2019.

The EBITDA represent earnings before interest, tax, depreciation and amortization. Adjusted EBITDA excludes non-recurrent charges.

SSP recorded a positive EBITDA of SR 0.55 million in the current period, including non-recurring charges, compared to SR 14.35 million in the similar period of year 2019. Excluding non-recurrent charges, adjusted EBITDA is SR 19.60 million in the current period. 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, the Company ramped up its operations after lifting the lockdown measures and its 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 September 30, 2020 have exceeded its share capital by SR 141.2 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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