Saudi Arabian Mining Company, one of the Gulf’s biggest miners, reported an annual 91 per cent drop in second-quarter net profit due to lower average sales prices of its products, higher expenses and increased finance costs.

Net profit after zakat and tax for the three months to the end of June fell to 351 million Saudi riyals ($93.6 million), amid higher personnel and exploration costs, the company said in a filing on Sunday to the Tadawul stock exchange, where its shares are traded.

Revenue in the April-June period declined 41 per cent year-on-year to 6.9 billion riyals, reflecting lower prices of commodities except for gold, Ma’aden, as the Riyadh-listed company is known, said.

Earnings before interest, taxes, depreciation and amortisation (Ebitda) decreased 69 per cent year-on-year to 2.1 billion riyals, it said.

However, the decrease in net profit was partially offset by the higher sales volumes of all products except ammonia, primary aluminium and flat rolled products, Ma’aden said.

“Across the business, we reported further increases in production and sales volumes despite lower commodity prices from peak levels last year,” Robert Wilt, chief executive of Ma’aden, said.

“We are beginning to see an improvement in raw material pricing and, despite the challenging market environment, remain well placed to meet the growing long-term demand for our products.”

Ma’aden, which is majority-owned by the kingdom’s Public Investment Fund, is central to Riyadh’s economic diversification strategy. The expansion of the industrial and mining sectors is one of the main objectives of the kingdom’s Vision 2030 agenda, which positions mining as a third pillar of the economy.

The kingdom aims to more than triple the mining sector’s contribution to the nation’s economic output by 2030. Ma’aden operates several extraction sites and mines in Saudi Arabia to produce gold, copper, iron ore and strategic minerals.

Under its new corporate strategy, Ma’aden aims to grow tenfold by 2040 and to move into strategic minerals to fuel the growth of downstream industries in Saudi Arabia, the Arab world’s biggest economy.

Factors that contributed to a decline in Ma’aden’s second-quarter profit included a 40 per cent increase in general and administrative expenses, an 86 per cent rise in finance cost due to higher interest rates, a 116 per cent increase in exploration and technical services expenses and a 59 per cent drop in net profit of joint ventures attributable to Ma’aden.

Its zakat, income tax and severance fees expenses also rose by 2 per cent, mainly due to one-off severance fees charge, the company said. This was partially offset by lower zakat and income tax as a result of decrease in profitability.

The decline in the quarterly profit was partially offset by a 6 per cent drop in the cost of sales due to a decrease in raw material costs, a 17 per cent drop in selling, marketing and logistic expenses, a rise in income from time deposits and an increase in other non-operating income, the company said.

Looking ahead, the company said on Sunday it is making “good progress” in implementing a new operating model, which is expected to have a “material impact” in the medium-to-long term in improving productivity and optimising costs.

Updated: August 13, 2023, 10:05 AM