RIYADH: Saudi Paper Manufacturing Co. edged lower, washing away early gains, after inking an agreement with Italy-based Toscotec for the production and supply of a tissue paper production line for the total cost of SR166 million ($44 million).
Saudi Paper’s share price fell 0.19 percent to reach SR52.70 at the end of Sunday’s trading session.
The deal is part of a letter of understanding both companies signed in June to purchase the fifth production line in Dammam 2nd Industrial City, which will produce tissue rolls with a capacity of 60,000 tons annually for SR300 million.
Upon signing the SR166 deal, Saudi Paper will make an advance payment within two months maximum, and the remaining amount will be paid in installments, corresponding to delivery, installation, receipt, and final operation.
As part of the contract, the company will receive a performance guarantee from the supplier for 16 months from the signing date.
The transaction will increase the company's tissue paper roll production capacity from 130,000 tons per annum to 190,000 tpa, in order to meet the needs of the local market and to expand exports.
In addition to the proceeds from the sale of some non-operating assets, the deal will be financed mainly from the company's operating revenues and the proceeds from the sale of certain non-operating assets, as well as proceeds from legal claims, for which judgments were awarded in favor of the company.
Banks and local finance agencies will also play a role in obtaining part of the funding for this project.
The financial impact of the project will become apparent from the fourth quarter of 2022.
Toscotec is one of the world's leading tissue paper producers and offers the latest technologies and solutions. With this eco-friendly technology, maximum production efficiency is achieved, consumption is reduced, operating costs are reduced, and final products are of the highest quality.
