United Wire Factories Co.’s (Aslak) financial position is strong, and the capital cut decision was taken due to capital surplus and not to offset losses, CNBC Arabia reported, citing Chief Executive Officer, Nabil H. Al-Amir.
He indicated that the company will not need to raise new capital soon, stating the firm has sufficient financial resources to invest in any significant opportunities and engage in any new activities in the current and future period.
According to data compiled by Argaam, the Capital Market Authority (CMA) approved yesterday Aslak’s request to reduce its capital by 20% to SAR 351 million from SAR 438.75 million.
On the COVID-19 impact, he said that things were not clear yet, despite the improvement in the market after Eid Al-Fitr, adding the company will determine the impact of the crisis by the end of the second quarter.
Al-Amir pointed out that the company’s financials were affected in April and May, as demand was negatively impacted by the Kingdom’s precautionary measures.
However, Aslak witnessed an improvement in demand in June, which is expected to compensate for the losses incurred in the past 2 months (April and May), the CEO noted.
“The situation is still reassuring, and the company has good potential to resist the effects of the current crisis,” he said.
Al-Amir further highlighted that Aslak’s production was not fully suspended, but decreased in some segments by 30% to 35%, to maintain a certain level of cost absorption.
The company will reap the benefit of these procedures soon, he added.
Aslak reported a net profit after Zakat and tax of SAR 15.1 million for Q1 2020, an increase of 50% year-on-year (YoY), driven by higher sales volumes and profit margins.
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