MEPCO expects rebound in domestic demand, current situation 'temporary': CEO

Sami Safran, CEO of Middle East Paper Co. (MEPCO)

Middle East Paper Co. (MEPCO) expects an improvement in domestic demand during the second half of 2023, after the end of the official holidays season, said CEO Sami Safran.

He told Argaam that prices are currently affected by the global demand for cardboard and global economic conditions.

The global cardboard market is witnessing a slowdown in demand recovery, which weighed on global prices. This led to a 37% year-on-year (YoY) drop in the company's sales revenues in the first half of 2023, said the CEO.

He added that sales revenues fell by 15% quarter-on-quarter in Q2 2023, indicating that global prices witnessed an unprecedented rise in H1 2023. This was as a result of increased demand, a rebound in e-commerce, and the relative post-pandemic economic recovery.

In the last week of Q2 2023, MEPCO launched commercial operations at jumbo tissue rolls production plant of its associate Juthor Paper Manufacturing Co. In one week, MEPCO generated nearly SAR 1 million, underpinning the group's robust performance and its local and global competitiveness, according to Safran.

The production capacity of Juthor’s plant is estimated at 60,000 tons of jumbo tissue paper. The company produced 140 tons in the first week of the plant’s commercial launch, Safran noted.

During the year, the total cardboard production capacity stood at 425,000 tons. In the first half, the company produced about 208,000 tons, a decrease of 2%, due to a relative decline in local demand as a result of public holidays.

MEPCO is maintaining a continuous and stable performance for its companies. Being pressured by international prices is only a temporary situation. Domestic and external demand for cardboard is expected to continue through the third quarter, especially as the volume of exports increased by 17% YoY in the first half of 2023, said Safran.

He added that the company is working to boost Juthor’s market share, further expand into the tissue market, as well as improve financial policy, reduce costs, proceed with the digital transformation plan and develop competencies.

MEPCO logged SAR 26.7 million loss for H1 2023, against SAR 191 million profit in same period a year ago. Q2 loss amounted to about SAR 20.1 million, according to Argaam's data.