Saudi Paper Manufacturing Co. (SPM), through its subsidiary Saudi Paper Converting Co., signed a SAR 9.2 million agreement with Taiwan’s Ocean Associate Co. Ltd. to buy three new machines to boost the converting production capacity, develop tissue paper production lines (the end product), reduce product cost and improve its quality.
The deal will be financed from working capital, SPM said in a bourse filing.
An advance payment of 30% of the total agreement value will be paid, while the rest will be paid in installments in line with the receipt, installation, operation and final receipt with the company obtaining a performance guarantee from the supplier, according to the terms of the contract.
The new machines will increase the production capacity by 3,600 tons annually for the end product of tissue paper, through shifting to full automation and reducing dependence on the human factor in operation. Moreover, the paper manufacturer will reduce the cost of consuming raw materials by 4.8%.
The deal will boost the company's production capacity of paper products (the end product) from 42,000 tons to 45,600 tons annually.
The relevant financial impact will reflect on the plant and equipment as well as the obligations in the value of the contract payments and in conjunction with their payment. It is expected to show as of Q2 2021.
Ocean Associate has more than 30 years of experience in manufacturing and exporting converting tissues machines, providing the latest technologies and solutions for tissue converters across the world. The company’s technology aims to achieve maximum production efficiency and reduce consumption and operating costs as per the international quality standards.
Production is expected to start during the fourth quarter of 2022, SPM added.
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