MEPCO Profits Jump 421% during 1Q to SR92 mln

The net profit after zakat and tax for the Middle East Paper Manufacturing and Production Company “MEPCO” jumped to SR92 million during the first quarter, compared to SR18 million during the same quarter of the previous year, by 421%.

This came after MEPCO announcement on Wednesday of the consolidated preliminary financial results for the period ending on 31.03.2022 (three months).

The operational profit amounted to SR101 million during the first quarter, compared to SR23 million during the same quarter of the previous year, an increase of 340%.

The gross profit amounted to SR143 million during the first quarter, compared to SR48 million during the same quarter of the previous year, a growth of 198%.

Profits per share during the current period amounted to SR1.85, compared to SR0.36 during the same period of the previous year.

The main reasons for the increase in net profit are an increase in revenue by 52% as a result of the increase in selling prices for all the company’s products. This is driven by an increase in prices of Company’s products globally and as a result GP Margin has been increased from 24% to 47%.

The impact of the above increase in sales price is partially offset by an increase in the cost of sales by SR9.3 mln , general and administrative expenses by SR 5.2 mln, selling and distribution expenses by SR 3.45 mln, other expenses by SR 3.35 mln, zakat expenses by SR 3.2 mln as well as reduction in other income of SR 4.6 mln comprising of gain on disposal of PPE of SR 2.4 mln and scrap sales of SR 2.6 mln in same quarter of previous year which did not occur in the current quarter.

Increase in selling and distribution expenses comprise of transportation and shipping costs that rise due to increase in export sales and increased shipping costs globally. Other expenses comprise of loss on disposal of PPE of SR 2 mln and foreign currency exchange losses of SR 1.5 mln. Increase in general and administrative expenses mainly comprise of SR 3.4 mln increase in payroll costs that is due to salary increments and additional manpower hired by the Company.

The main reason for slight decrease in net profit of 2.6% in the current quarter compared to the preceding quarter of the last year is decrease in revenue by 6.7%. The decrease is mainly attributable to relatively low volume of sales of the Company’s products in the current quarter. Despite of low volume, the Company was able to increase GP Margin from 45% to 47% in current quarter due to decrease in cost of sales by SR 18 mln that is mainly due to decrease in price of raw materials by SR 9 mln and decrease in provision for slow moving inventories by SR 3.3 mln.

Other changes that offset the decrease in revenue comprise of reduction in Selling, General and Administrative (SG&A) costs by SR 13.8 mln and in impairment of financial assets by SR 4.5 mln. These costs savings were netted with the increase in zakat expense by SR 4 mln, other expenses by SR 3.35 mln and reduction in other income by SR 9.2 mln. Other income in the preceding quarter comprise of gain on early settlement of financial liabilities of SR 6 mln and gain on disposal of SR 3 mln that did not occur in the current quarter. Savings in SG&A of SR 13.8 mln occurred due to low shipping costs owing to low export sales and better logistics costs control policies and reduced payroll costs.