MMG's Half Year Results: Al-Mojil Family Statement

Aug 01, 2016, 06:23 ET from The Al-Mojil family

DAMMAM, Kingdom of Saudi Arabia, August 1, 2016 /PRNewswire/ --

Saudi contractor Mohammad Al-Mojil Group ("MMG") announced yesterday its 2016 half year results. MMG reported a net loss of 42 Million Saudi Riyals in the last quarter according to a statement posted on the Saudi bourse.  

In June 2016, the Committee for the Resolution of Securities Disputes (CRSD) - part of Saudi Arabia's Capital Market Authority (CMA) - imposed prison sentences on three MMG executives. Founder Mohammad Al-Mojil and his son Adel were each sentenced to five years' imprisonment for claims relating to a 2008 IPO prospectus.

Later that month, MMG's board resigned in its entirety, citing the "unlimited liability" on directors posed by the CMA's actions. The Al-Mojil family strongly criticised the CRSD judgement, describing the ruling as being based on "fundamentally flawed evidence" and a "biased investigation".

Shortly afterwards, the CMA appointed an administrative committee to oversee MMG's affairs until the shareholders elect a new board. It is not known when MMG will hold its next shareholder assembly. Mr. Mohammad Al-Mojil still owns 50% of MMG. The remaining 50% is owned mainly by Saudi retail public shareholders.

In their latest statement, the former board laments the perceived lack of assistance offered by Saudi Arabian authorities to help resolve an issue seriously impacting MMG - and the construction sector as a whole - regarding significant numbers of loss-making sub-contracts.

Yesterday's published half year results show an increase in the accumulated losses by June 30th, 2016 (with the interim losses) to SR 3.6 Billion or 289% of paid-up capital. Such numbers render the long-term recovery of the company impossible without the collection of the off-balance sheet assets that it is owed by customers and/or the injection of fresh equity funding from external sources.

In response to the latest financial results, a statement from the Al-Mojil family referred much of the responsibility for these losses to the mega projects' foreign contractors (EPC's) enjoying favouritism and protection on the expense of their local subcontractors when there are delays and disruptions on sites (a common feature in Saudi Arabia especially recently). MMG failed to recover hundreds of millions of assets it had to provide for as losses due to non-payment from contractors that won projects from a Saudi government related body and were paid billions of Riyals. They subcontracted and failed to pay MMG its fair and legitimate compensation.

This is an inevitable outcome from the lack of meaningful support to MMG by Saudi government agencies and organizations, the latest of which is the CMA's recent heavy-handed and unrealistic verdict, which was not based on facts, but feelings and opinions fuelled by unjust and disproportionate rhetoric from certain shareholders and critics. Instead of tackling the real issues behind the complex and myriad problems affecting the Saudi construction sector in the last few years, the CMA concentrated its efforts on punishing MMG's founders, after it restricted the free market forces to set the share price and exchange ownership. For over 60 years under the patronage of the family, MMG - the first of two Saudi contractors to list on the stock exchange - has contributed to the development of the construction sector in Saudi Arabia, and has been a responsible well-known employer of thousands of Saudis, many of whom now find their future in jeopardy.

The founder of MMG at this stage invites those critics of the company and its outgoing board to step forward to fill vacant positions on the board and showcase their managerial skills and vision. The statement added that the founder does not intend to vote in the upcoming shareholders' general assembly on any agenda item and will leave matters for the CMA and the rest of the shareholders to decide.

SOURCE The Al-Mojil family