Saudi Steel Pipe Co. announces its interim Financial results for the period ending on 2018-12-31 ( Twelve Months )

Element List	Current Quarter	Similar quarter for previous year	%Change	Previous Quarter	% Change
Sales/Revenue	186.29	211.75	-12.023	126.48	47.288
Total Profit (Loss)	-4.61	28.94	-	-11.82	-60.998
Profit (Loss) Operational	-19.05	15.66	-	-23.64	-19.416
Net Profit (Loss) after Zakat and Tax	-100.64	15.65	-	-24.15	316.728
Total Comprehensive Income	-101.95	14.62	-	-24.15	322.153
All figures are in (Millions) Saudi Arabia, Riyals

Element List	Current Period	Similar period for previous year	%Change
Sales/Revenue	646.2	696.42	-7.211
Total Profit (Loss)	-0.71	93.44	-
Profit (Loss) Operational	-49.06	45.47	-
Net Profit (Loss) after Zakat and Tax	-166.66	19.09	-
Total Comprehensive Income	-167.97	18.06	-
Total Share Holders Equity (after deducting minority equity)	561.44	729.85	-23.074
Profit (Loss) per Share	-3.3	0.38
All figures are in (Millions) Saudi Arabia, Riyals

	Accumulated Losses	Capital	Percentage %
	124,793,726	510,000,000	24.47

Element List	Explanation
Reason for increase (decrease) in net profit for current quarter compared to the same quarter of the previous year	The reason for net loss for Q4 2018 compared to net income for Q4 2017 despite increase in net income of the associate (Global Pipe Company) is due to:

a) Impairment loss of SR 51.99 million in subsidiary company (TSM Arabia) based on an evaluation study performed by an independent consultant.

b) Providing provision amounting to SR 30 million to account for expected credit loss (under IFRS 9) for financial guarantee provided on behalf of an investee company (Polysilicon Technology Company).

c) Increase in net loss incurred by subsidiary company (TSM Arabia).

d) Decrease in project deliveries for pipes due to delay in raw material deliveries.

e) Increase in raw material prices resulting in lower margins.

f) Additional provision for slow moving inventories amounting to SR 5 million compared to same period last year and recording write-down loss of inventories amounting to SR 1.5 million despite reversal of provision for warranty on project sales amounting to SR 3.9 million. Reason for increase (decrease) in net profit for current quarter compared to the previous quarter The reason for increase in net loss for Q4 2018 compared to Q3 2018 despite increase in sales of pipes due to increase in project deliveries and commercial sales and increase in net income of associate (Global Pipe Company) is:

a) Impairment loss of SR 51.99 million in subsidiary company (TSM Arabia) based on an evaluation study performed by an independent consultant.

c) Increase in net loss incurred by subsidiary company (TSM Arabia).

d) Providing provision for slow moving inventories amounting to SR 5.5 million and recording write-down loss of inventories amounting to SR 1.5 million despite reversal of provision for warranty on project sales amounting to SR 3.9 million. Reason for increase (decrease) in net profit for current period compared to the similar period of the previous year The reason for net loss for the year 2018 compared with the net income for the year 2017 is due to:

a) Impairment loss of SR 51.99 million in subsidiary company (TSM Arabia) based on an evaluation study performed by an independent consultant.

b) Impairment loss of SR 21 million in bending unit based on an evaluation study performed by an independent consultant.

c) Net loss incurred by subsidiary company (TSM Arabia).

d) Providing provision amounting to SR 30 million to account for expected credit loss (under IFRS 9) for financial guarantee provided on behalf of an investee company (Polysilicon Technology Company).

e) Decline in the financial performance of associate company (Global Pipe Company) compared to previous year.

f) No production activity at large diameter factory during the scheduled shutdown period as announced earlier.

g) Additional provision for slow moving inventories amounting to SR 7.8 million compared to last year and recording write-down loss of inventories amounting to SR 1.5 million despite net reversal of provision for warranty on project sales amounting to SR 0.9 million.

h) Decrease in project deliveries for pipes due to delay in raw material deliveries.

i) Increase in raw material prices resulting in lower margins. Type of the external auditor's opinion Emphasis of Matter paragraph External auditor's report containing reservation Without qualifying our conclusion, we draw attention to the following;

1- Note 2 to the accompanying condensed consolidated interim financial statements; where the accumulated losses of TSM Arabia (the subsidiary) as at December 31, 2018 have exceeded its share capital by SR 115.92 million. The Board of Directors of the Group has passed a resolution to continue TSM Arabia's business and to provide sufficient financial support to enable TSM Arabia to meet its financial obligations as and when they fall due. Accordingly, the subsidiary’s financial statements were prepared on a going concern basis. Additionally, the subsidiary was in breach of its loan facilities financial covenants. The management of the subsidiary is in the process of taking the necessary remedial actions to resolve the breach including obtaining the required waiver documents. Accordingly, the loans are continued to be classified as per their original terms of payment.

2- Note 2 and Note 4.4 (b) to the accompanying condensed consolidated interim financial statements; where management has considered the continuous losses of TSM Arabia (the subsidiary) as an indication of impairment for its assets. Accordingly, management has appointed an independent consultant for conducting an impairment study for the subsidiary. This study has resulted in an impairment of an amount of SR 51.99 million which has been charged to the Group’s condensed consolidated interim statement of profit or loss and other comprehensive income in the current period. The impairment study was based on various assumptions made by management on the outcome of future events, including significant increase in utilization, growth and revenues. The achievement of the results included in the study is highly dependent on the realization of these assumptions. Management is confident that these assumptions will be realized in the future. Reclassifications in quarter financial result Items, elements and notes of the comparatives in the Condensed Consolidated Interim Financial Statements have been regrouped and reclassified to meet with the accounting policies for the current period which have been prepared in accordance with IFRS. Additional Information The accumulated losses as at 31 December 2018 is amounting to SR 124.79 million which is 24.47% of the share capital. The main reasons for these accumulated losses are impairment loss on subsidiary (TSM Arabia), net loss incurred by subsidiary company (TSM Arabia), and providing provision for expected credit loss (under IFRS 9) for financial guarantee provided on behalf of an investee company.

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