MEPCO holds 25% local market share, exports 40% of production: CEO

Middle East Paper Co. (MEPCO) holds nearly a 25% market share in the local market, CEO Sami Safran told CNBC Arabia, adding that the company focuses on geographical distribution, as it exports about 40% of its production.

The top official indicated that, despite the negative economic indicators for next year, he expects 2024 to outperform 2023, saying that the company will continue next year to control the cost of production with the expected improvement in prices over the coming period.

MEPCO has witnessed a 20% decline in the cost of production per ton in 2023, but selling prices fell by 30%. Meanwhile, operating rates in the plant exceed 90% compared to 80% globally, Safran said.

He also stated that MEPCO's decision to expand comes at a very excellent time in light of the expansions taking place in the Kingdom, indicating that these expansions will be financed through the subscription proceeds while the rest will be financed through the issuance of bonds or green sukuk. He noted that the paper production plant PM5 project requires investments worth SAR 1.7 billion.

Meanwhile, the company plans to increase capital from SAR 666.67 million to SAR 866.67 million, through issuing 20 million shares at SAR 10 par value each, at a total subscription amount of SAR 630 million. The Public Investment Fund shall have the right to fully subscribe to the new shares, thus bringing its post-increase ownership to 23.08%, according to Argaam's data.

The capital increase is aimed to partially finance the cost of the paper production plant (PM5) and the tissue production plant (TM6), as well as the acquisition of a group of assets and shares of existing facilities in the manufacturing and supply of corrugated board, to achieve vertical integration.