MEPCO approves SAR 1.78B budget to start cardboard factory project

Middle East Paper Co. (MEPCO) announced the start of the cardboard factory project (fifth paper line), with a production capacity of 450,000 tons, according to a statement to Tadawul.

The feasibility study for the project has been completed and a final budget of SAR 1.78 billion was approved, including the value of the project land, with an internal rate of return estimated at 14.5%.

The project is expected to be completed in 42 months, the statement added, noting that it will be funded by the company’s internal resources, by long-term loans from local banks and proceeds from the issuance of shares to the Public Investment Fund (PIF).

In addition, MEPCO pointed out that establishing a new limited liability company to manage the project was approved, noting that the project is to be executed by J.M. Voith SE & Co. KG Co. Construction will start in Q3 2024.

The statement highlighted that the expected date for completion and start of pilot and commercial production is Q4 2027. Pilot production will last one month.

The company announced, in a separate statement on Tadawul, that it signed, on April 22, an engineering and supply contract with J.M. Voith SE & Co. KG, for manufacturing, supplying and supervising the installation of the main machine for the new cardboard factory project (fifth paper line).

The value of the 36-month contract exceeds 62% of the company’s total revenue, according to the latest audited annual financial statements.

The statement indicated that that the contract includes the purchase of a complete line for a paper production machine with a production capacity of 450,000 tons annually, and a speed of 1,600 meters/minute. The manufacturing, supply, and supervision of the installation of the machine will be the responsibility of the other party.

The statement further pointed out that the project’s financial impact is expected to appear in Q4 2027, adding that there are no related parties to the deal.