METALS (Hadeed)

Hadeed’s key product offerings include Long Products, which typically consist of Rebar and Rods, while Flat Products consist of various types of Rolled Coils, which are produced based on order requirements. These products are used in various industries such as construction. Most of Hadeed sales are in Saudi Arabia.

FINANCIAL HIGHLIGHTS

Revenue in 2019 was SAR 10.79 billion, a decrease of SAR 0.03 billion, compared to SAR 10.8 billion in 2018. This was attributed to a decrease in sales volume by -2% compared to 2018, which is driven by steel demand that dropped as compared to 2018, partially offset by a slightly better average selling price and product mix.

The loss of operations for 2019 was SAR 1 billion, a decrease of SAR 1.3 billion, compared to SAR 0.3 in 2018. This was attributed to the increase in variable cost and the decrease in sales volume.

OPERATING HIGHLIGHTS

2019 proved to be another challenging year for the global and local steel-making industry, where several factors pushed down steel economic indicators.

Prices of raw material on the other hand experienced sharp increase mainly due to a force majeure incident at one of the largest global iron ore suppliers.

Adding to these challenges, were prices for imported material and tariffs imposed by regional countries and paired with limited infrastructure spending.

To face these industry economic headwinds throughout the year, we focused on key strategic areas, and continued to enhance our capabilities to achieve lean, efficient and sustainable results. Hadeed’s strong economic fundamentals, strategic leadership, and manufacturing and human assets have supported us in moving ahead in 2019, and successfully surpassing over 8% of the target set by the transformation program for the year.

A key initiative in 2019 aimed at improving profit margins by gaining more business in the high quality, high value end of the market.

In addition, Hadeed achieved remarkable improvement records by focusing on value-added products and cost optimization. We have also improved our industrial processes. In addition, we explored new markets with a wider range of products, consistent with the requirements of local and global markets.

Our transformation program, first initiated in 2017, has resulted in a successful turnaround performance, with the aim to achieve a sustainable first quartile competitive performance and profitability.

In 2019, our key strategic focus to fulfil our transformation objectives was on:

• Upstream investment in iron ore mining for further cost optimization of our principal raw material.
• Cost efficiency program to optimize fixed costs and maintain organization effectiveness.
• Synergies with domestic governmental and investment agencies to contribute to Saudi Arabia’s localization drive.
• Synergies with internal manufacturing entities among SABIC corporate on common and shared interest projects consistent with our cost optimization program.
• Cooperation with local regulators to adopt fair market practices.

We conducted our annual analysis of environmental and safety performance, building on SABIC’s critical organizational behavior and Leadership Way strategy, which guides every leader to help our business, including bettering EHSS performance.

Besides environmental and safety performance, other key issues addressed this year included plant reliability and organizational optimization, and improvements in resource-utilization and product waste reduction.

We initiated a Utilization of Hydrogen Tail Gas project at Hadeed Direct Reduction plants to synergize with SABIC affiliates by using hydrogen-rich streams, which these affiliates produce through our direct reduction process. This added considerable value to the use of these streams.

Hadeed also developed a novel process for graphite carbon production from natural gas and enhancement of the steelmaking process using CO2 purging, giving us an edge over competitors as regards to intellectual property and production cost.

Improvements continued to be made in supply chain this year, as Hadeed introduced a “truck saddle” redesign, eliminating human intervention, enhancing employee-safety while increasing handling process efficiency by up to 37%. The drive for efficiency extended to our dealings with third parties, with a new land transport contracting strategy launched in August expected to cut logistics costs by around 7–13%.

We are the preferred supplier for a wide range of quality products in local and regional markets, further strengthening the Hadeed brand.

We were also successful in several identified capex initiatives related to energy efficiency, efficient use of raw material used, better material handling, and improved electric arc furnace processes. Sustained progress was also made on recycling waste water and waste heat recovery programs.

LOOKING AHEAD

With the global economic outlook still uncertain, we expect the marketplace to continue presenting challenges for the steel industry in the near future. But we are committed to maintain the momentum of our transformation program, and continue addressing those challenges by maintaining our efforts to bear down on costs, improve production efficiencies and productivity, and invest in the skills and capabilities of our people. Our materials will continue to equip architects and builders in Saudi Arabia with the high performance they need to construct the planned mega projects under Vision 2030. We will apply foresight and technical expertise to move steadily up the value chain, gaining ever-greater access to export markets and to the high value-add end of the marketplace for metals.