Saudi Arabia’s East Pipes Integrated Company for Industry (East Pipes), has garnered a market share of around 50 per cent of the helical submerged arch welding (HSAW) market in the Kingdom of Saudi Arabia (KSA) and is now looking forward to expand into foreign markets, according to East Pipes Chief Executive Officer, Mohammed Al-Shaheen.

East Pipes, which joined the Saudi stock exchange (Tadawul) earlier this year, was established in 2010 and specialises in manufacturing steel pipes, with a production capacity of up to 500,000 tonnes of pipes annually that are used to transport water, oil and gas.

The company carried out more than 75 projects and produced above two million metric tonnes of HSAW pipes as well as 16 million sq m of coated pipes for strategic projects in fields of water, oil, and gas applications.

Mohammed Al-Shaheen

Ahead of listing, the pipes manufacturer raised SR504 million of proceeds from an initial public offering (IPO).  Just last month (March), it obtained a Shariah-compliant working capital financing worth SR500 million ($133 million) from Bank Albilad. The proceeds will be used to “finance the working capital of one the company’s projects,” the Dammam-based company said in a bourse filing.

“The company has been able to anchor its position as a leader and succeeded in increasing its share in the helical submerged arch welding pipes (HSAW) market in the Kingdom from 15 per cent in 2015 to more than 50 per cent in 2019G,” Al-Shaheen said in a statement to the bourse prior to filing its IPO.

According to him, the steel pipe industry is witnessing a phase of strong growth supported by the economic transformation programmes and non-oil sector development plans in the Kingdom, which has led to a rise in demand within the local market and an increase in opportunities for further growth,” the leading pipe manufacturer of HSAW pipes said in a statement to Saudi exchange.

East Pipes focuses on a strategy that enables it to maintain its competitive advantage by investing in its manufacturing capability, efficient manufacturing processes and its people in order to be the leading supplier in the rapidly growing HSAW pipe market in the Kingdom of Saudi Arabia.

In its statement to the bourse prior to filing its IPO, Al-Shaheen said that the company’s Board of Directors historic decision to proceed with the IPO was part of the company’s overall corporate development strategy to institutionalise the company, strengthen its brand and anchor its competitive position as a leader in the pipes industry market, as part of its next phase of growth.

The CEO stressed that the company is keen to keep pace with the changes and developments of the pipes and coating sector, pivoting on significant demand from new projects, increasing the company market share, and maximising its revenues and earnings.

East Pipes is able to provide integrated solutions to customers due to the range of its services. It produces a wide range of pipes by width and has the highest production capacities in the GCC, he added. Due to its integrated nature, the company is able to receive and deliver orders without the need for subcontracting with third parties, an additional competitive advantage of the company over other manufacturers and counterparties. The company continues to develop new products that will meet the customers’ needs and requirements, he added.

Al-Shaheen also said that the company is seeking to expand the scope of its business targeting markets outside the Kingdom. In 2016, East Pipes exported 91,542 metric tonnes of pipes to the Carso Group in North America. Currently, the market in the Kingdom is growing rapidly as the government is implementing economic transformation programs and developing the non-oil sector, resulting in higher demand within the domestic market and increased opportunities for further growth.

East Pipes manufactures various types of pipes with outer diameters ranging up to 100 inches

The CEO clarified that the company has been able to achieve strong financial performance, and results achieved clearly indicate the strong and successful business model of the company despite the challenges faced by the Kingdom and the world likewise due to the Covid-19 pandemic.

Al-Shaheen stated that economic transformation plan in the Kingdom has been remarkably successful and has significantly driven the continuous development of the infrastructure, oil, gas, and water industries. He pointed out that since its inception more than a decade ago, East Pipes has taken the initiative to establish the pipe industry in the Kingdom and meet the growing demand of pipes by producing products in Saudi Arabia that conform to the best international standards.

COMPREHENSIVE SOLUTIONS

Following the merger with Welspun Pipes Coating Company on July 21, 2020, East Pipes owns and operates three integrated plants located in the second industrial city in Dammam and provides comprehensive solutions to its customers.

The company’s plants include (1): The HSAW pipes plant, one of the largest spiral pipe manufacturing facilities in the GCC region, with a production capacity of up to 500,000 metric tonnes per year; (2): The double jointing plant with a production capacity of 45,000 joints per year, and (3) The coating plant which has a production capacity of 4,500,000 sq m per year, the plant provides external anti-corrosion coating through a triple layer of polyethylene, polypropylene, or high-performance epoxy polymer.

The company has modern, sophisticated manufacturing equipment including advanced laboratory, testing facilities that operate to international standards, accredited by the International Organization for Standardization (ISO), and are equipped with the latest inspection and testing technologies.

The company is able to take advantage of its high production capacity and operational efficiency to maintain a high degree of competitiveness, he said.

East Pipe company business is strategically important based on the nature of HSAW pipes, which are essential to the water, oil, and gas sectors. The company has increased its market share significantly in the recent years as a result of the large water projects awarded by the Saline Water Conversion Corporation, boosting its position as a market leader. East Pipes is also a major supplier to the oil and gas industry, as it has completed major projects in the past, such as the Qatif to Ras Tanura pipeline, the Yanbu to the north of Jeddah pipeline, and the crude oil transit line from north Kuwait.

COMPETITIVE ADVANTAGES

The company has advanced and integrated manufacturing facilities located in the second industrial city in Dammam, including the HSAW plant, the double jointing plant, and the pipe coating plant, enabling the company to provide integrated pipe solutions to its customers.

East Pipes is also a major supplier to the oil and gas industry

The company has the ability to produce various types of pipes. It can produce pipes with outer diameters ranging up to 100 inches, thicknesses up to 25.4 mm, and lengths up to 18.2 mm for single pipe and up to 26.2 for jointed pipes.

It also has strong relationships with key customers in the market such as Saline Water Conversion Corporation and Saudi Aramco. East Pipes focuses also on developing its business and products on a continuous basis.

STRONG FINANCIALS

With a strong financial position, East Pipe’s management succeeded in converting a loss of SR69.3 million in the fiscal year ended 31 March 2019 to a profit of SR 236.9 million in the fiscal year ended 2020. Revenues also increased by 136 per cent in the fiscal year ended March 31, 2020 compared to the fiscal year ended March 31, 2019. The company was also able to realise operational efficiency, as sales, marketing and general and administrative expenses decreased from SR 26.3 million in the fiscal year ended 2019 to SR 20.4 million in the fiscal year ended 2020, enabling the company to achieve operational profit margin of 18.9 per cent in the fiscal year ended 31 March 2020 compared to a loss margin of 6.3 per cent in the fiscal year ended 31 March 2019. The increase in revenues realised in FY 2020 is ascribed to increased production capacity in parallel with new projects awarded to the company by the SWCC.

Despite the decrease in profits in the fiscal year ended 31 March 2021G to SR 147.8 million, the company improved gross profit margin to 24.6 per cent compared to 20.2 per cent in the fiscal year ended 31 March 2020.

PIPES MARKET

The global welding pipe market consists of three products: helical submerged arch welding pipes, longitudinal submerged arch welding pipes (LSAW), and electrical resistance welded (ERW) pipes.

The Middle East is a key area for the welded pipes market due to rapidly growing water and gas consumption, driven by announcement of large and vital projects requiring significant investment in pipelines.

The demand for HSAW and LSAW pipes in the GCC countries was around 1,730,000 metric tonnes in 2019. Demand for HSAW pipes in the Kingdom accounts for around 60 per cent of the total HSAW pipe demand in the GCC. Hence, the Saudi market is the main driver of the demand volume in the GCC region.

Demand for HSAW pipes in the Kingdom is driven by growth of the economy and the clear development programs launched by the government under the Kingdom’s Vision 2030, the National Transformation Program, the National Industrial Development Program, Logistic Program, the Housing Program, and the Financial Sector Development Program.