‘There is plenty of future growth for us in Saudi Arabia’: Fourth Milling Co.’s CEO

Dubai: Khalid Al-Maktary is pleased – and he has every reason to be.

The CEO of Saudi Arabia’s Fourth Milling Company (or MC4) is into the final phases of a successful IPO, one in which the book-building process generated an order book of SR102.2 billion and a subscription coverage of around 119. The company had set the offer price at SR5.3 a share, which is at the higher end of the SR5-SR5.3 it had announced as the range. (The IPO sees MC4 put up 30%.)

This is the latest go-to-market for Saudi Arabia’s biggest wheat mills, and a natural end-game for a privatization process that started in 2007.

In an interview with ‘Gulf News’, Khalid Al-Maktary talks of the present and the more forward-looking plans for the company.

Once the IPO proceeds come in, is the plan of MC4 to deploy the funds on any immediate expansion plans?

The proceeds from the IPO will be going to our shareholders. It won’t be used on new investments or further expansions - and that’s because the company already enjoys a strong cash position.

We operate on fairly high margins, with a majority of the sales settled in cash upfront. That’s enough for us to finance all of our strategic projects from within.

Now, in two to three years, we have an opportunity to expand further.

There’s a growing population in Saudi Arabia with good disposable incomes. Between now and 2030, the population is expected to grow at 2.5% CAGR while disposable income per capita will rise 4.7%. All of which will happen alongside key projects in the Riyadh area, or those targeted at religious tourism in Mecca and Madina, and those around the Red Sea projects.

All of which adds to the population – and that’s where we see a lot of our future growth coming from.

So, MC4 already has the production capacities to meet that population and demand growth for your food commodity?

Sure, we will expand our capacity to keep up with the growth. But keep in mind that we already have unique strategic advantages from our locations in Dammam, Medina and Al Kharj, thus catering to 80% of the population.

Remember, we are also present in areas with the highest population growth such as Riyadh and Medina.

Once we get the approval, we do have a plan to expand the current Al Kharj facility by adding another mill.

As for greenfield projects, we are studying a couple of projects that are in sync with our future needs. We are looking at several options that we can capitalize on based on the strong base we have in the flour and wheat milling business.

The key focus for us is organic growth.

Does it make commercial sense for MC4 to add another food commodity to the portfolio?

Our business split comes from having regulated products – which are available at (government mandated subsidized prices) and unregulated product. The majority of our sales comes from the wheat sold in 45kg and bulk.

We are not looking at exports simply because our products are subsidized. And our priority for now is only to meet local demand.

When there is clarity or a possibility for exports, we will pursue that plan.

All the sourcing of wheat is happening through Saudi Arabia’s GFSA (General Food Security Authority). The Kingdom has committed serious investments to food security.

In the future, we might look at direct sourcing for some specialty items.

As for the immediate future, what’s your plan for annual dividends?

We are committed to paying 70% of the net profit. That’s a measure of the strong cash position we have.

Our business – and the industry we are in - is all about logistics. That is, how well you can deliver your product to the farthest places in the Kingdom at the most efficient price.