Construction

Saudi cement maker Al Jouf plans to sue over $36m loss

December 5, 2023, 9:47 AM

Saudi giga-projects are driving long-term demand for cement, according to analysts

Ex-board members under scrutiny
Auditor looking at loss-making deal
‘Suspected forgery’ of signature

A Saudi cement producer is planning to sue three of its former board members for their role in an investment that resulted in a SAR136 million ($36.3 million) loss.

Al Jouf Cement Company said in a filing to the Saudi Stock Exchange it was seeking authorisation from its general assembly for the liability lawsuit, which relates to its investment in Eastern Industrial Company.

An audit firm is currently investigating possible “violations or administrative irregularities” in this and other deals, Al Jouf added.

The auditor’s report on Eastern Industrial Company, which is now in liquidation, alleges that a “suspected forgery of the former deputy chairman’s signature” was used to approve the investment.

The report also suggests that the transaction was completed without the general assembly’s approval and in violation of company bylaws.

The trio were not named in the Tadawul filing, but were described as “the responsible individuals (three former board members) directly involved in the decision to invest in the Eastern Industrial Company”.

Al Jouf’s filing said the auditor was conducting a comprehensive study of all financial operations and contracts that might contain irregularities, from the company’s listing in 2010 up to the middle of 2022.

“The auditor is still inspecting, reviewing and auditing all company records. Once the report on each suspected case is finalised, the company will announce it to all shareholders,” it said.

“This reaffirms the company’s commitment to transparency and disclosure, assuring shareholders that it will take all necessary measures to preserve the company’s interests and the rights of its shareholders.”

Al Jouf owns factories in the northwestern region of Saudi Arabia, close to the borders with Jordan and Iraq.

Its net income for the third quarter of 2023 was SAR29 million, up from SAR5.9 million in the same quarter last year and SAR20.1 million in Q2.

Unveiling the Q3 results last month, Al Jouf attributed the rise in net income to higher sale price and volume of products as well as a drop in costs.

Demand for cement in Saudi Arabia was subdued during the first half of 2023, according to research from Al Rajhi Capital. This was down to elevated inflation and interest rates, it said.

However, Al Rajhi added that long-term demand for cement remained intact – underpinned by the kingdom’s programme of giga-projects.

“Cement sales will continue to rise gradually as broad-based acceleration in investment kicks in with regard to the several mega and giga-projects.”