By Asma Alsharif
Company to raise output capacity in anticipation of a rise in demand in 2011.
Saudi Cable Co is spending $149 million to more than double its output capacity by the end of 2010 to improve its cost efficiency and gear up for a recovery in demand in 2011.
"We started in 2007 and we are about 75 percent done ... by the end of this year (output capacity) will be up to 100,000 tonnes of cables," managing director Waheeb Linjawi told Reuters in an interview.
"We are going to increase our capacity to lower the cost per unit," he said.
The expansion has already raised Saudi Cable's production capacity to 75,000 tonnes from 45,000 tonnes in 2009, he said.
Linjawi said the extra production would be exported mainly to Gulf Arab countries.
"The market is there ... We expanded on the basis that demand from Gulf Cooperation Council countries is huge but we are also targeting other countries in the region".
There is also a domestic rationale for the firm to raise output, since the Saudi government is currently spending $400 billion in the five years to end-2013 on infrastructure and development projects.
"Demand is now picking up again ... I anticipate a brighter future because of the huge infrastructure and housing projects (In Saudi Arabia) and anticipate level of demand will exceed the height of 2008 by 2011," Linjawi said.
State owned Saudi Industrial Development Fund (SIDF) provided 29 percent of the financing for the expansion and the remainder came from local banks, credit lines from equipment makers and the firm's own resources.
Sales in 2009 were hurt by order cancellations after the global slowdown reduced prices of copper, the main production input. Some clients cancelled orders they made before copper prices declined, Linjawi said.
He said: "Because of the uncertainty in the financial crisis some of the projects were delayed or cancelled and that is what contributed to the lower (sales) volumes for the first three quarters (of 2009)."
The price of a tonne of copper fell from $8,000 to $3,000 in 2008, but it has gradually recovered to $7,000 by end-2009.
Third quarter net profit fell 78 percent to $5.35 million, the lowest quarterly earnings since a $3.7 million net loss its made in the fourth quarter of 2008 - after sales for the third quarter declined by almost half their level a year earlier.
Sales in the nine months to the end of September 2009 stood at $493.3 million, down by almost a third from the same period in 2008.
Linjawi declined to give forecasts for the company's earnings for the fourth quarter or for all of 2009. He noted however that the financial crisis hit both copper prices and demand last year.
Linjawi said: "For 2010 we feel the demand is there but the competition is fierce."
The company says it is Saudi Arabia's second biggest maker of cables after unlisted Riyadh Cables Co.
In August Saudi Cable bought a 79 percent stake in Turkish electronic equipments maker Elimsan for $33 million, part of its strategy to consolidate and diversify its products. (Reuters)