INVESTOR PRESENTATION - www.mepco.biz - Investor Relations
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www.mepco.biz
I N V E S T O R P R E S E N TAT I O N
As at 30 September 2018
Disclaimer
This presentation is prepared by MEPCO and contains basic information
about Company activity as of the latest published results. The information
is presented in summary rather than detailed form. This information,
including any forward-looking statements, should not be taken as basis for
investment recommendation/solicitation for any of the Company’s
tradable securities.
While management has made every effort to present a fair view of
MEPCO’s operational and financial performance in this presentation; it is
important to note that expectations about the future results that come in
light of prevailing operational, financial and market conditions may change
in the future. Management does not recommend using such forward
looking statements in financial modeling or investment decision making. It
thus takes no liability to explain differences between future actual results
and what was stated in the course of this presentation.
IR Presentation | 30 October 2018 Page| 2
CORPORATE & OPERATIONAL REVIEW
Shareholding structure and share information
Share Information
Shareholding structure Market Tadawul, Saudi Arabia
Currency SAR
ISIN code SA13Q050IP16
Listing date 3 May 2015
Financial year end 31 December
Abdulkadir Al Muhaidib &
23.2%
Sons Co. Authorized capital (SAR) 500,000,000
Lafana Holding
Issued shares 50,000,000
48.8%
Abdullah AlMuammar Paid capital (SAR) 500,000,000
18.4% Par value (SAR) 10.00
Free Float
9.5% Free float shares 24,400,000
(as at 30 September 2018)
Percentage of non-Saudi ownership 4.9%
(as at 30 September 2018)
IR Presentation | 30 October 2018 Page| 4
Management
Sami Al Safran – CEO Najib Fakih Ibrahim – President, WASCO
• Over 25 years of professional experience • Over 37 years of industry experience
• 19 years in the paper industry • 15 years of experience in waste management
• Chemical Engineering graduate of King Fahd University • 20 years of experience with Savola Group
of Petroleum & Minerals (KFUPM) • Chemical Engineering graduate of KFUPM
Mohamed Saleh Darweesh – CFO Abdul Razik Askalani – Plant Manager
• Over 25 years of experience in financial management • Over 28 years of relevant experience
• Doctorate in Finance, USA • 14 years of experience with MEPCO
• Certified Public Accountant (CPA), California, USA • Graduated with a BSc in Geo-Chemistry
Wadia Malibari – COO Ahmad El Fazary– Chief Commercial Officer
• Over 25 years of experience • Over 12 years of international marketing experience
• 10 years of experience with MEPCO and WASCO • 5 years of experience at MEPCO
• Qualified Chemical Engineer with an MBA • Post-Graduate diploma in International Trading
IR Presentation | 30 October 2018 Page| 5
Core strengths
Sales growth of 700% in 15 years 80% of raw materials sourced by subsidiary
Raw
material
sourcing
One of the largest and fastest growing paper manufacturers in the region
High level of vertical integration, driving industry-leading efficiency
Consistently lower production costs than the industry average
Strong financial performance since inception Conversion
Highly-experienced management team Production
IR Presentation | 30 October 2018 Page| 6
Benefits of recycling paper
Recycling paper has a
quantifiable impact
on the global Energy Forest Pollution
environment and on conservation conservation reduction
industry, replacing
polluting • Uses 28-70% less • Preserves natural • Reduces the need
manufacturing energy ecosystems for landfills and
processes with • Uses less water incinerators
renewable, greener • Puts industrial • Prevents water
and more efficient waste water to pollution
technology, while good use
allowing forests to
thrive and grow
IR Presentation | 30 October 2018 Page| 7
This is how the story begins… IR Presentation | 30 October 2018 Page| 8
Overview of operations
Plant Utilities
Installed capacity 475,000 tons In-house power plant 48 MW
Total lines 3 Grid connection 7 MW
Total plant investment SAR 1,774 million Captive power generated 40 MW
Total production and Captive water supplied 6,000 m3/day
storage sites (Jeddah) 471,000 sq. m
IR Presentation | 30 October 2018 Page| 9
Products
Category Product description End use
MEPLINER Outer & inner layers of a carton box
Corrugating medium layer of a
MEPFLUTE Consumer goods packaging
carton box
Containerboard
Corrugating medium layer of a Industrial goods
MEPCHEM
carton box, chemically treated
Carton boxes for logistics
MEPKRAFT Outer & inner layers of a carton box Food and fresh produce
Product lines
packaging
MEPWHITE Outer & inner layers of a carton box
Mixture of MEPFLUTE & MEPLINER
MEPDUAL
Outer & inner layers of a carton box
Paper tube or core used in textile, Film/tape/label cores
MEPCORE
paper or other reels Textile and paper roll cores
Layers of linerboard bonded to a
Interior wall linings
MEPGYPSUM gypsum plaster core forming a
Gypsum board
wallboard
Layers of laminates applied in Wood furniture, flooring, and
MEPLAMINATE
finishing surfaces of furniture industrial films
IR Presentation | 30 October 2018 Page| 10Fifteen-year growth story IR Presentation | 30 October 2018 Page| 11
Sustainable operating model
Environmental
sustainability
◉ Environmental and economic sustainability is the
heart of MEPCO’s operating model
◉ Captive power generation ensures low cost and
efficiency for manufacturing plant Agility to prioritise Vertically
domestic and/or integrated
◉ Captive waste water treatment dramatically reduces
export markets operations
strain on local water supply
◉ WASCO provides raw material availability and
logistical convenience for MEPCO
Effective and
industry-leading cost
control
IR Presentation | 30 October 2018 Page| 12Localized raw materials sourcing
MEPCO secures consistent supply of raw materials through its subsidiary WASCO
WASCO is the largest recyclable paper collector in the MENA region, collecting
over 40% of KSA’s waste paper through 23 hubs
WASCO collects about half a million tons of waste material
WASCO expects further increases in collection once regulations for waste
management are in place
Sources of RCP include 9 leased landfills, third-party landfills, converting
businesses, printing companies, supermarkets, shopping centres and others
IR Presentation | 30 October 2018 Page| 13Localized raw materials sourcing
WASCO RCP sources RCP collection in Saudi Arabia (tons/year)
WASCO Non WASCO
Contracted
suppliers Landfill 429
391 475 480
26% 27% 352
336 337
220 277
Direct 263
581 600 540
Collection 494 506 535 525
47% 380 383
237
Source: MEPCO management 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
IR Presentation | 30 October 2018 Page| 14Boosting cost competitiveness
MEPCO has achieved cost efficiency through:
Localized RCP Collection
Strategically located water treatment plant with efficient
water collection
Self generated power
Efficient logistics infrastructure supported by centralized plant
location (near Jeddah Port)
Customized in-house production of chemicals
Continuous operational improvement programs
IR Presentation | 30 October 2018 Page| 15Potential growth avenues
STRATEGY DESCRIPTION
Backward Focus on growing backward integration
integration of WASCO’s operations
Expansion Focus on core business by building scale of Strategic
of core operations, improving efficiencies and and/or
operations diversifying products & markets
opportunistic growth
Expand downstream into packaging.
Forward
Develop capabilities in primary
integration and/or secondary packaging
IR Presentation | 30 October 2018 Page| 16Alignment with Vision 2030
◉ MEPCO provides tangible social and economic benefit by adding value to
the economy through business revenues, social investments, job
opportunities, and improving environmental awareness through
programmes, campaigns and community initiatives
Vision 2030 is a plan to reduce Saudi Arabia's
dependence on oil, diversify its economy,
and develop public service sectors such as
◉ Our commercial and CSR programmes are aligned, and are aligned with
health, education, infrastructure, recreation,
the agenda of Saudi Vision 2030
and tourism. Goals include reinforcing
economic and investment activities,
◉ Most of MEPCO’s business processes and operations are in line with
increasing non-oil industry trade between
Vision 2030. Being an eco-friendly company and generating foreign
countries through goods and consumer
revenue for Saudi Arabia are both important factors in the new economic
products, and increasing government
agenda
spending on the military, manufacturing
equipment and ammunitions.
IR Presentation | 30 October 2018 Page| 17Key partners
NGOs
Waste Collection and Higher Institute for Paper Collaborating with NGOs to
Recycling Company & Industrial Technologies achieve CSR mission
An integrated subsidiary An educational institution MEPCO works with leading
of MEPCO, established in established in 2013 by CSR partners, promoting social
2004 and specialized in MEPCO for Saudi students awareness on the subject of
management of taking the Academic waste recycling and
recyclable waste paper Diploma in Paper & environmental protection
and other materials Industrial Technologies through waste management
IR Presentation | 30 October 2018 Page| 18COMMERCIAL REVIEW
Dynamics of international paper market
◉ Supply and demand
◉ Demand for containerboard products has a direct link with population and
GDP growth rates
◉ Availability and cost of raw materials
◉ Virgin fibers are affected by regularized manmade forestation outputs,
while recovered fibers are affected by recovery and utilization rates
◉ Direct manufacturing costs & logistics
◉ Water and energy costs are material elements of direct cost in the paper
industry
◉ Other factors
◉ Technology, environmental concerns, etc.
IR Presentation | 30 October 2018 Page| 20Strong regional position
Regional production capacity (‘000 tons)
◉ Now second largest containerboard producer in Modern Karton (Turkey) 1050
the region
MEPCO (Saudi Arabia) 475
◉ Exports to over 40 countries representing 35% -
Waraq (Saudi Arabia) 470
45% of total consolidated sales
Kipas (Turkey) 400
◉ Local sales account for 22% share of KSA’s
containerboard market Kahramanamaras (Turkey) 250
◉ Limited MENA competition in niche products Selkasan (Turkey) 170
indicate strong growth potential in coming
years Union Paper Mills (UAE) 173
Source: RISI | Pulp & Paper Industry Intelligence First Co (Egypt) 100
ETAP (Turkey) 70
Gulf Paper (UAE) 50
Source: PWC
IR Presentation | 30 October 2018 Page| 21Diversified and flexible sales
MEPCO’s sales are Exports to over
diversified across 40 countries ranged between
markets and products 41% - 59% of total consolidated sales
MEPCO has complete flexibility
to re-focus manufacturing output and
Diversified exports:
customer base Enables switching between emphasis on
(over 200) exports or local sales to meet market
demand and exploit opportunities for
improved margins
IR Presentation | 30 October 2018 Page| 22Diversified and flexible sales
Sales Vol. by Product (%) 9M 2018 Local vs. Export Sales Vol. (%) 9M 2018
31%
41%
59%
69%
Conventional
Local sales
Non-conventional Export sales
IR Presentation | 30 October 2018 Page| 23International export footprint
MEPCO
MEPCO’s key
export markets
account for
approximately 70%
of total export
sales MEPCO has a sizeable market share in each of these markets and is
looking to diversify and expand its export footprint in Europe
IR Presentation | 30 October 2018 Page| 24FINANCIAL REVIEW
Financial performance highlights
Q-o-Q Y-o-Y
200,000 190,303 700,000
180,000
600,000
160,000 173,622
140,000 132,390 500,000
120,000 131,886
400,000
SAR (000)
SAR (000)
100,000
300,000
80,000 87,158
63,118 65,081
60,000 200,000
59,818
40,000 50,507
43,646
100,000
20,000 28,917 30,165
0 0
Q2'18 Q3'18 9M'17 9M'18
GP EBITDA NP Revenues
IR Presentation | 30 October 2018 Page| 26Financial performance: healthy margins
Q-o-Q Y-o-Y
35.00%
30.2%
28.9% 28.9% 30.00%
27.7%
26.3%
23.1% 23.4% 25.00%
23.3%
20.00%
14.0% 15.00%
13.2% 13.2%
10.00%
7.7%
5.00%
0.00%
Q2'18 Q3'18 9M'17 9M'18
GPM EBITDAM NM
IR Presentation | 30 October 2018 Page| 27Financial performance: capital structure
900 2.5
2.21
Capital Structure (SAR million)
800
810 1.85
765 2
700 722
713
1.6
600 658
621 603 1.34 1.5
500 533
1.26 502 482
469 474 466
400 431 1.04 1
0.98
300 579 619 0.83
328
284
200 228 0.5
209 198 217
169
100 141 43
2 3 2 3 3 5 2
- 0
2011 2012 2013 2014 2015 2016 2017 9M'2018
Equity Long term Borrowings Short term Borrowings Note Payables Debt Equity Ratio
IR Presentation | 30 October 2018 Page| 28APPENDIX
About: recycled paper processing
• Recycled paper processing mills use paper as • Recovered fiber can be used to produce new
their feedstock paper products made entirely of recovered fiber,
or from a blend of recovered and virgin fiber
• Recovered paper is combined with water in a
pulper, which separates fibers • It is generally accepted that a fiber can be used
five to seven times before it becomes too short
• The resultant slurry passes through separation (as a result of repulping and other handling) to
processes to remove contaminants such as ink, be useable in new paper products
clays, dirt, plastic and metals
• Recovered paper with long cellulose fibers (such
• Mechanical separation equipment includes as office paper) has the greatest flexibility for
coarse and fine screens, centrifugal cleaners, and recycling
dispersion or kneading units that break apart ink
particles • For this reason, recovered paper with long fibers
is generally of higher value than recovered paper
• Deinking processes use special systems aided by with short fiber
soaps or surfactants to wash or float ink and
other particles away
IR Presentation | 30 October 2018 Page| 30Benefits of recycled paper
Benefits of recycling paper Energy conservation
• Recycling paper and paperboard waste provides • Less energy is required than for the production of
raw materials to that can save money on the virgin paper products
production of new goods
• Recycled paper production needs 28-70% less energy
• Recycling also creates jobs and supports the
growth of green technologies and industries • Production of recycled paper requires far less water
because there is no need to turn wood into pulp (when
• From an environmental perspective, recycling most water is used)
paper products reduces the need for landfills and
incinerators, while reducing water pollution and • Recycling 1 ton of paper can save 30,000 litres of water
the release of greenhouse gas emissions
IR Presentation | 30 October 2018 Page| 31Benefits of recycled paper (cont.)
Forest conservation Pollution reduction
• Tree farms are the primary source for wood • The production of new paper products requires the use of
converted into new paper oil and chlorine (for bleaching), which results in the
emission of toxins. When waste paper degrades in
• The growing need for more wood has led to the landfills, it releases methane gas
need to clear forests, which are vital ecosystems
and habitats. These forests are replaced by • Recycled paper is typically not re-bleached. If it is, oxygen
“sustainable” tree farms rather than chlorine is the agent used. Moreover, recycling
1 ton of paper saves 1,800 litres of oil
• Lack of diversity of tree species on farms means
wildlife is displaced and ecosystems are damaged • Recycling therefore directly reduces pollutants in air and
water
• Paper recycling reduces the need to clear old
forests to plant tree farms, because demand is met • Recycling paper has a positive impact on industry and the
by recycled products environment, replacing polluting manufacturing processes
with renewable, greener technology, while allowing
natural forests to thrive
IR Presentation | 30 October 2018 Page| 32INVESTOR RELATIONS
CONTACT
T: +966 (012) 6380111
F: +966 (012) 6389111
E: investors@mepco.biz
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