Saudi firm fails to profit from construction boom.
Saudi metal company loses some of its shine
The National Metal Manufacturing and Casting Company, also known as Maadaniyah, retreated its most since January 15 as investors reacted badly to a sharp fourth-quarter reversal.
Shares in the company fell 4.7 per cent in early trading but ended flat at 29.4 Saudi riyals.
The maker of industrial wire and steel products said it had a fourth-quarter loss of 3 million riyals compared with a profit of 5.3m riyals in the same period a year earlier. Still, the company recorded a full-year profit of 16.7m riyals, compared with 15.5m riyals in 2009. It said although its profits for last year were helped by an improvement in the average selling price of products and an increase in income in some segments, the reason for incurring a net loss in the fourth quarter was down to a decrease in sales as well as an increase in the cost of raw materials.
Analysts said although the general construction sector was booming in Saudi Arabia, Maadaniyah was not specialised enough to capture significant market share or pass on the rising price of raw materials to consumers.
Maadaniyah's ferrous wire is used in the production of electrical cables, upholstery, furniture and in construction. It supplies a wide range of industries but operates mostly at low margins. This means the company has become more a supplier of choice rather than a specialist producer of equipment for the construction business.
The construction sector is one of the largest and fastest growing in the Gulf, but some analysts question Maadaniyah's ability to compete with big names such as Arabian Pipes Company.
In 2009, the Saudi government spent US$176bn on construction, according to a report issued by the National Commercial Bank, which is based in the kingdom.
Property investment, which is one of the drivers of construction in the country, is estimated to have reached $400bn last year, a 33 per cent increase compared with 2009, according to the property firm CB Richard Ellis.