Exceptional growth in the profits of the utility company for 2023
Marafiq, the integrated utility provider in the Kingdom’s major industrial cities, announced a remarkable leap in its annual net profit for 2023. Profits surged by an astonishing 2520.6% to reach SAR 449.7 million, compared to a net profit of only SAR 17.15 million in 2022. This strong financial performance reflects the company’s operational efficiency and its ability to maximize its revenues in a favorable economic environment.
General context and the role of “Marafiq” in the Saudi economy
Marafiq was established by royal decree in 2000 and plays a pivotal role in supporting the industrial infrastructure of the Kingdom of Saudi Arabia, particularly in the industrial cities of Jubail and Yanbu, which are among the world’s largest petrochemical and heavy industrial hubs. Its core mission is to provide reliable and efficient electricity and water services (desalinated, potable, and cooling and treatment water). The company’s major shareholders include key strategic entities such as the Royal Commission for Jubail and Yanbu, the Public Investment Fund, Saudi Aramco, and SABIC, giving it strong support and a unique position in the utilities sector. This impressive financial performance follows its successful listing on the Saudi Stock Exchange (Tadawul) in late 2022, further bolstering investor confidence in its long-term strategy.
Analysis of the reasons for the jump in net profit
According to the official statement published by the company on the Saudi Stock Exchange (Tadawul) website, this significant increase in profits is primarily attributed to several positive factors, most notably the non-recurrence of the provision for doubtful debts amounting to SAR 496.20 million, which was recorded in the previous year (2022) and was related to high electricity consumption tariffs. This factor alone constituted the fundamental reason for the comparison with the very low profit base of the previous year. In addition, the following factors contributed to boosting profitability:
- Revenue growth: Revenue from Tawreed (a wholly-owned subsidiary) increased by 13.61%, equivalent to SAR 350.50 million. Revenue from the water and gas sectors also rose by 4.08% (SAR 107.71 million).
- Reduced financing costs: The company succeeded in reducing financing costs by 9.73%, saving 101.52 million riyals.
- Increase in other revenues: Other operating revenues increased by 18.86% to SAR 41.95 million.
Conversely, this growth was limited by the rise in some operating costs, such as the increase in fuel costs used in production operations by 27.28% (515.71 million riyals), and the increase in energy and water purchase costs by 17.31% (151.03 million riyals).
The impact of results and dividends on investors
These positive results reflect the strength of Marafiq's financial position and underscore its importance as a key pillar in supporting the industrial sector, which is central to the Kingdom's Vision 2030. For investors, the company's board of directors announced its decision to distribute generous cash dividends for the second half of 2023, further enhancing the stock's appeal to investors seeking regular returns. The details of the distribution are as follows:
- Total amount distributed: 450 million riyals.
- Number of shares due: 250 million shares.
- Share value: 1.80 riyals.
- Distribution ratio: 18% of the nominal value of the share.
- Eligibility date: March 10, 2024.
- Distribution date: March 31, 2024.
This decision confirms management’s confidence in the company’s future cash flows and its ability to continue achieving sustainable growth, serving the interests of its shareholders and supporting the national economy.
