The future of the Saudi industrial construction company Mohammad Al-Mojil Group (MMG) could be decided at an extraordinary general meeting (EGM) soon.
In a statement made to the Saudi stock exchange, MMG announced it was preparing to call an EGM to discuss its future after making an anticipated 800 million Saudi riyals (Dh783.5m) loss in the second quarter. MMG said the expected losses would lead the company to record accumulated losses of an unprecedented 1.5 billion riyals, exceeding its total capital of 1.25bn riyals and triggering rules requiring an EGM to discuss winding the company up.
According to the company, its liabilities stood at 2.64bn riyals at the end of June. Liabilities worth a total of 2.32bn riyals fall due within the next 12 months.
The company has faced intense competition from UAE rivals such as Arabtec and Drake & Scull International (DSI) in recent years and has struggled to diversify beyond its existing client base of providing services to the public sector oil and gas producer Aramco.
MMG, which is comparable in size to DSI, attributed the poor results partly to 443m riyals of losses incurred at two of its main projects, Al Manifa oil refinery in the Arabian Gulf and the King Abdullah Centre for Petroleum Studies and Research in Haii Al Narjas, Riyadh, both of which it is building for Saudi Aramco. It added it had also been required to renegotiate its contract to build the oil refinery from lump sum to a "cost plus" basis to protect it from incurring losses worth 500m riyals.
The company said total bank debt stood at 1.16bn riyals. It added the eight banks exposed to the company include: SABB Bank, which is owed 310m riyals; and Riyad Bank, which is owed 250m riyals. It said it was currently in negotiations with lenders to extend its credit restrictions after a meeting with them yesterday proved inconclusive.
MMG said it was owed 1.3bn riyals for existing and completed projects, which had not been included in its second-quarter results. It added the company would "take all necessary legal measures" to collect the cash it was owed.
The company's shares were suspended from trading on the Tadawul bourse in July after it failed to announce its second-quarter results on time. "The decision [of the EGM] could go either way," said Tariq Qaqish, the deputy head of asset management at Al Mal Capital. "Saudi Arabia has a well diversified economy and a much bigger market than the UAE and the private sector plays a much bigger role.
"It seems very unlikely that the government would step in to save a private company so it is down to the players involved," he said.