East Pipes CEO says energy investments to continue driving demand

Mohammed Darweesh, CEO of East Pipes Integrated Company for Industry

Mohammed Darweesh, acting CEO of East Pipes Integrated Company for Industry, expects strong demand to continue in the coming period, supported by ongoing investments in the energy sector.

The company sees demand exceeding 2.1 million tons at various stages of development and tendering. About 258,000 tons have already been awarded in the market, while nearly 355,000 tons are at the engineering and quotation stages, alongside significant future opportunities being tendered in phases, Darweesh told Argaam.

Regarding contracts signed with Saudi Aramco, Darweesh said they are on schedule, adding that the company began securing raw materials early to avoid potential delays and meet agreed delivery deadlines amid current conditions.

The contracts are expected to significantly boost utilization rates, with the largest alone equivalent to about one-third of the previous fiscal year’s SAR 2.3 billion revenue, supporting revenue and profitability in Q4 and Q1 through improved fixed-cost absorption.

Darweesh described Q2 results as excellent and positive given current geopolitical conditions. The decline in profit and revenue year on year was due to lower production and sales after vessels were rerouted to Jeddah and Yanbu ports, where prolonged berthing delays held up raw material deliveries and forced production schedules to be revised.

He stressed that this does not reflect weaker demand for the company's products, but rather temporary challenges linked to current conditions. Lower production volumes and higher shipping costs have significantly affected revenue and profitability.

Utilization rates fell sharply, with the impact evident in the reported figures while Q2 revenue declined about 34% from Q1, directly reflecting lower production volumes caused by delayed steel coil shipments.

The company is gradually seeing more regular supplies and is coordinating arrival schedules with suppliers to align with delivery plans, aiming to gradually return to normal production levels in the second half of the fiscal year, alongside the start of Aramco contract execution in Q4. The pace of recovery will depend on developments in the region, Darweesh said.

Regarding the impact of geopolitical conditions on shipping, he said the company's main raw material is hot-rolled steel coils, previously received through Dammam seaport. However, vessels have since been rerouted to ports on Saudi Arabia's western coast.

The company has a broad base of customer-approved suppliers and uses local sources whenever they meet project specifications.

Darweesh said shipping and insurance costs remain elevated and are being closely monitored, with a return to normal levels dependent on the resolution of current geopolitical conditions.

On delays to existing projects and contracts, the resulting order backlog and whether deferred sales could be recovered in the second half of the fiscal year, he said, adding that some volumes originally scheduled for delivery in Q2 had been rescheduled in coordination with customers for production in subsequent financial periods.

Darweesh said performance next quarter will depend on geopolitical developments and shipping conditions, adding that the company remains committed to meeting agreed delivery schedules and quality standards.