Mohammed Al-Mudarres, CEO of Saudi Industrial Services Co. (SISCO)
Mohammed Al-Mudarres, CEO of Saudi Industrial Services Co. (SISCO), said that the financial impact of reducing the company’s direct stake in Red Sea Gateway Terminal (RSGT) to 36.8% from 60.1% will be “short-lived” and is likely to show in the third quarter of the year.
This is likely in similar deals, as strategic objectives were set in the long term through the entrance of strategic partners, such as the Public Investment Fund (PIF) and COSCO SHIPPING Ports Limited (CSPL), to support and develop the terminal’s operations going forward, Al-Mudarres added in an interview with Al-Arabiya TV.
In the long term, as strategic partners join the company with planned expansions, growth and acquisitions in the coming years, SISCO’s operations are expected to see steady growth.
Moreover, SISCO will work in the medium and long term to offset that decline through injecting some of the sale proceeds in new investments, acquisitions and expansions to make for the short-lived profit drop after the deal.
In July, SISCO concluded the sale of its 21.2% direct stake and 18.8% stake of other minority shareholders in RSGT to PIF and CSPL, through its wholly-owned subsidiary, Sound Joyce Enterprises Limited, on a pro-rata basis for SAR 556.5 million, Argaam reported.
Under the deal, SISCO’s 21.2% direct equity in RSGT, a 4% direct stake in its 76%-owned subsidiary, Saudi Trade and Export Development Co. Ltd. (LogiPoint), and a 14.8% stake of other minority shareholders of RSGT were sold to PIF and CSPL on a pro-rata basis.
The deal paperwork has been finalized since the beginning of the year.
The cash proceeds were also credited to the company’s accounts, but according to the global financial systems, the actual holding will be recognized, not the SAR 556 million cash flows, Al-Mudarres explained. A financial impact of almost SAR 362 million will be reflected on equity, as it was converted from tangible to cash assets. Accordingly, it will be recognized under equity with no impact on the company’s income statement in terms of revenue and profit.
Meanwhile, financial statements are consolidated either through the majority ownership or reaching an agreement on management rights, the top executive noted, adding that the existing and new shareholders agreed on keeping the management rights with SISCO.
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