Gulf Steel Works (GSW) plans to list shares on the Saudi Stock Exchange (Tadawul) in two years, following its initial public offering (IPO) on the Nomu Parallel Market this month, chief executive Zafer Jeha told Argaam.
The company is selling six million shares, or 30 percent of capital, on Nomu from Nov. 27 to Dec. 18. Saudi Fransi Capital, the financial advisor and lead manager of the IPO for Gulf Steel Works, launched the book building process last month.
The move to list shares on the parallel market, in line with the company’s new governance framework, is aimed at boosting confidence of both clients as well as employees, Jeha said.
Q: Can you brief us on the company’s business profile?
A: GSW’s plant was first established in 1994 on an area of 25,000 square meters (sqm), with a maximum production capacity of 300 tons per month. However, the plant was later expanded to spread over 147,000 sqm, thanks to the government’s support.
We produce specialized products serving the infrastructure needs of oil and gas and industrial projects. GSW’s products and services include weld overlay, skids, process equipment, storage tanks, structural steel, as well as plant maintenance products. The company has a current capital of SAR 200 million.
Q: What is the company’s market share in its core business segments?
A: Our company is one of the key four players in the structural steel market, with a 20 percent market share. We have also secured a leading position in the field of pressure vessels, pipe racks, equipment structures, derrick structures, platforms, and steel buildings. We expect to enjoy a comparative advantage over international competitors in supplying many local projects of Saudi Aramco.
Q: What percentage of total sales comes from the local market?
A: Local sales account for 95 percent of total sales, and are mainly related to projects in oil and gas, petrochemicals, and other industries. Four years ago, exports represented 30 percent of sales; however, the company currently focuses on the local market. However, we are planning to boost our presence in overseas markets.
Q: What are the foreign markets GSW is eyeing?
A: We currently focus on the local market and we have some projects in the GCC region. In addition, we have started marketing our products in global markets, particularly for the oil and gas industry.
Q: How does the company hedge against the volatility of steel and metal prices?
A: In the structural steel segment, which accounted for 29 percent of sales for the fiscal year ending March 2017, the company can secure supply contracts shortly after winning any relevant deal. However, in other business divisions, prices are set in advance.
Q: How will energy subsidy cuts impact your company?
A: The energy subsidy cut may not affect products, but rather the cost of labor. However, raising prices of end-products will eliminate such an impact.
Q. What does GSW aim to achieve with its Nomu listing?
A: The listing comes in line with the company’s new governance framework, which aims to enhance the confidence of customers and employees. It is also important for the company’s future projects.
Q: What are the company’s future plans and projects?
A: We are gearing up for a project in the insulation soldering field, in which we have secured the second rank locally. The company also seeks to expand and provide new solutions in the field of shale oil and gas platforms. In addition, we are looking to introduce a new set of products, like water injection skids, which were recently approved. We are also eyeing exports to international markets outside the GCC and Middle East.
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