Can you give us a brief overview of your operations over the last two years and how they have been affected by the economic uncertainty facing the Kingdom?
USC was established in 1997 with a production capacity of 500,000 tons. Since then, several expansions have taken place to elevate our scale and cope with local and regional demand. Our current capacity is 1.3 million tons, making us one of the largest sugar refineries in the world with full integration to international future markets to secure our hedging position. Our products meet international standards, and we are proud to be a preferred supplier of many multinational companies, both in Saudi and the region. Local market sales represent 70% of our business, while exports cover the other 30%. In the past two years, we have encountered many challenges as well as opportunities. In addition to the macroeconomic factors that continue to impact the whole market, the sugar industry has an additional challenge to deal with: potential production over-capacity. To date, we are the only local supplier in the Kingdom with a capacity that exceeds the market consumption. Soon, the whole market will have to cope with the imminent start-up of two new refineries, which will potentially create a significant oversupply in the local and regional markets. On the export front, factors such as political instability, concentration of production, high insurance costs, and protectionist measures have all contributed to the creation of a tougher economic reality. However, our scale and experience in the region make us well equipped to weather such challenges, as we've done in the past 20 years.
How do you expect demand to evolve in the medium term?
Demand is anticipated to be under pressure, though we expect it to stabilize in the medium term. We maintain a positive view on market demand and acknowledge the overwhelming need to cut cost and elevate product offering. Sugar is a basic commodity; therefore, the demand remains generally stable and relatively predictable. Having said that, we expect the anticipated oversupply in the local market to result in strong competition, as a result of which exports will become necessary. In the local market, innovation capability, higher efficiency, and superior customer service will make the difference.
What major challenges does the manufacturing sector in Saudi Arabia face today, and what strategies are you adopting to mitigate them?
There is no doubt the sector is witnessing several changes. Operating costs are increasing, and we are investing heavily to mitigate the risks associated with these changes. On the labor front, in addition to our Saudization efforts, we seek to reduce our costs through automation, replacing manual work where feasible with robotics, and improving our packaging materials. On the energy side, we have major energy projects in place to reduce our fuel consumption. More initiatives are being undertaken to enhance our efficiency and regulatory compliance, pushing the operating model forward to have the best offering and the best service in the industry.
What are your strategic priorities for 2019 and beyond?
We are working to provide great offering in the market and to cut costs on all fronts. We are focused on being extremely competitive to ensure we meet our customers' demand for the highest possible standards. Furthermore, we are investing significantly on the innovation side to make sure we have up-to-date products and marketing strategies. On the B2B side, we want to have a real end-to-end operating model in place, where we are involved in all aspects of the relationship. We are working with our customers to partner with them throughout their supply and manufacturing processes, including the after-sales service. We work hard to meet our customers' needs.