Mohammad Al-Mojil upbeat on revenues

Mohammad Al-Mojil Group (MMG), one of the largest Saudi construction companies in Saudi Arabia, has announced its interim consolidated financial and operating results for the six month period ended June 30, 2013, with its Board Chairman Adel Al-Mojil saying: “The Q2 financial and operational results fall in line with our expectations and move at a faster pace as our recovery plan continues to be well managed and strictly adhered to.”
The Q2 results showed a net loss of SR 37 million compared to SR 543.7 million for the same period last year, representing a decrease of 93.2 percent.
There was a 41.8 percent fall on the net loss of SR 63.6 million incurred in the previous quarter.
In addition, gross profit for Q2 amounted to SR 3.2 million compared to a gross loss of SR 516.5 million in Q2 last year.
The group’s Q2 operating loss totalled SR 30.1 million compared to SR 547.7 million in Q2 last year, representing an improvement of 94.5 percent.
MMG attributed the reduction in net loss for the current quarter to the continued progress being made on its operational restructuring plan and to the risk mitigation and control plans that are continuing to deliver improved financial stability.
Operational cash flow continues to be tightly controlled as the business relies on the proceeds generated from customer payments to meet critical supplier and employee costs each month.
Commenting on the latest results, Stewart Macphail, MMG president & CEO, said: “The business is starting to see stability and the risk profile of the group is improving.”
He said: “Losses will continue to be reported until we successfully complete the projects that were started prior to 2012. But, each quarter, the business is delivering more profitable revenue from new works, as resources are released from legacy projects.”
Macphail said: “This improved operational stability has also allowed us to start discussions with our lenders and other stakeholders about the financial restructuring of the group, with the objective of bringing it back to the stock market in 2014.”
The Q2 financial results also highlight the group’s increased focus on recovering its aged receivables and other payments due to it from works previously performed.
“The money due to MMG on the closed projects is a significant asset to the group, which we cannot currently show in our balance sheet but is being actively pursued with the customers in question,” said the CEO.
“We are holding contingent assets in excess of SR 1.5 billion, a significant percentage of which we believe can be recovered over the coming years,” Stewart added.
The business focus in MMG has shifted from large scale, high risk, and lump sum projects to developing and selling the core construction services needed to deliver these mega projects operationally.
MMG’s future value is embedded in its core capabilities in providing high quality construction services and the group is experiencing significant demand for these services in the market, be it fabricating steel, and welding pipes or providing accommodation solutions for workers, among others.
“The sums of the parts that make up a project are more profitable than the whole project. We are, and always will be, a construction group but we are now one that is focused on delivering profits through providing quality services to the market,” said Stewart.
Even during challenging times, the business focuses on providing a service to its customers that is both of a high quality and exemplary safety standard has never been called into question.
In Q2, the group received several recognition awards for health and safety and continued to comply with the rigorous and high quality standards set by its primary customer, Saudi Aramco.
Despite the challenging trading conditions, the group has generated positive cash flow results as follows:
Net cash used in operating activities was SR 56.6 million for the first half year compared to SR 239.9 million in the same period of 2012. This represents an improvement of SR 148.7 million as a result of the restructuring of the group’s operations and tighter controls on projects.
Net cash generated from investing activities was SR 81.6 million for the first half year compared to a cash usage of SR 67.1 million in the same period of last year.
This represents an improvement of SR 148.7 million as a result of improved controls, optimal allocation of resources and achieving targets of the recovery plan by sale of certain non-core assets. The group remains on plan to dispose of the non-core assets as explained in the EGM in Q4 last year.
Net cash used to repay bank financing was SR 18.9 million for Q2 compared to net use of additional bank loans of SR 215.1 million for Q2 of 2012. This represents an improvement by SR 234.0 million as the group has successfully relied on internal resources to fund its operations and initiate repayment of bank loans.
The group has also made significant progress in removing further risks associated with the completion of its remaining fixed price contracts which have required less provisions against contract costs to be taken during both Q1 and Q2 2013 than were seen in quarterly results over the past year.