MMG can be ranked among the best of the major Saudi contracting groups. It is a successful local contractor with strong relationships with major project sponsors and a host of international construction and engineering firms.
Although still family owned, the group sold 30 per cent of its shares via an initial public offering (IPO) in April last year, which was fortuitously timed before the recession hit the Gulf contracting sector, and at a time of strong growth in revenues. The company posted a 71 per cent increase in net revenues to SR3.35bn in 2008. However, its share price has been affected by the poor performance of the construction sector, falling from a high of SR82.25 a share in early September 2008 to below SR30 a share now.
Profitability in the first quarter of 2009 also fell dramatically, amid higher costs and lower profit margins, with net income falling to SR5.35m compared with SR143m in the equivalent period of 2008. There was a rise in profitability in the second quarter, with net profit doubling on the first quarter to SR11.6m.
The company attributes the recent slowdown to the exceptional circumstances in the wider contracting sector, with a series of major projects delayed by its main clients. Since October 2008, Saudi Aramco has cancelled the Dammam field development and shelved a further capacity increase at the Shaybah field. In December 2008, contractors were requested to submit new prices for the Karan gas field development and Manifa crude oil field developments.
Looking ahead, the rise in oil prices above $70 a barrel in the summer will give MMG confidence that the SR3bn worth of projects it has on its books will regain momentum over the next year. It will clearly be helped by the main Saudi sponsors’ strategy of favouring local contractors as the main government contracting bodies put into effect a massive investment programme.
The fact that MMG is large, experienced and local will stand it in good stead. Large foreign contracting groups like working with the group and see it as a vital partner in implementing major energy projects in the kingdom.