Zamil half-year and second quarter profits up 5%

Second quarter profits were up 14.5% on the first quarter

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Zamil Industrial, the construction-linked manufacturer, posted a 5.1% rise in profits for the first six months and a 5.3% jump for the second quarter compared with the same periods in 2009 as new contracts and increased production spurred business.

The company made SR63 million for the second quarter compared to the SR59.8 million last year, which is an increase of 14.5% on the SR55.1 million seen in the first quarter 2010. Half-year profits stood at SR118.1 million compared to the SR112.3 million during January-June in 2009.

However, operating profits for both the three-month and six-month periods fell on last year, down 12.3 % and 16% respectively. Second quarter operating profits stood at SR69.5 million compared to SR79.3 million in 2009.

The company cited better performance this quarter due to higher production and sales volumes in all company sectors, although sales value dropped by 12.4% which “was mainly due to lower raw material prices, especially steel,” it said in a statement.

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“Moreover, net profits increase was also attributed to a significant reduction in financial charges by 49%.” The company has since added tht the decline in operating profits due to an increase in expenses for selling and distribution as well as administration and engineering.

Zamil is one of the biggest Gulf-based suppliers of steel and glass, as well as air conditioners. The company’s Zamil Steel & Galvanizing division looks set to increase its capacity by half following the recent trial for the production at its second plant in Damman, Saudi Arabia.

The company is to spend SR40 million in the new plant, which will include the latest machinery and technology, including a 15.5-metre galvanising basin that measures 15.5 metres in length, 1.5 metres wide and 3.2 metres deep.

The new capacity will potentially increase production from 50,000 tonnes to 75,000 tonnes per year.

Yesterday the board approved the distribution of SR45 million as bi-annual dividends for the first half of 2010 at SR0.75 per share - representing 7.5% of the paid-up capital. Its stock closed up 2.5% to close at SR44.3, up from the low of SR40.1 seen on 8th June. Raju Sinha, an analyst at HSBC, recommended an 'overweight\ position in the company on 12th July.

In April Zamil Steel secured top spot in ConstructionWeek’s list of most influential suppliers in the GCC.

Last week it announced that it won a five-year SR173 million contract with French water operator Saur SA, to operate the water and sewerage networks in Mecca and Taif.