8.Reasons for the increase/(decrease) in net profit:
A.3rd Quarter, 2012 Vs. 3rd Quarter, 2011
The net loss of the current quarter was lower due to overall higher margins which were partially offset by higher operating expenses, mainly a result of increase in selling & distribution expenses arising from an additional provision for doubtful debts.
B.3rd Quarter, 2012 Vs. 2rd Quarter, 2012
The third quarter loss as compared to net profit of the second quarter was due to lower volume and margins.
The group results expectations were not met as delays in collecting some major overdue receivables hampered our normal operations. This collection delay unfortunately triggered an adverse reaction from some of our banks, (whose loan repayments were tied up to these collections) as they curtailed the usage of their originally granted facilities. This caused a major disruption in the normal flow of raw materials to our operating units.
This problem was largely resolved towards the end of the quarter by reaching an understanding with some of the financial institutions, in deferring their due payments. This enabled us to restore normal operations, and also provides us with a favorable outlook for the fourth quarter.
The order book continues to grow at improving margins, to support an optimistic future outlook even beyond the next quarter.
C.Nine months period till date
The increase in the net profit during the nine months of 2012 as compared to the nine months of 2011 is mainly due to higher margin offset by an increase in operating expenses and finance cost. The increase in operating expenses is mainly due to higher selling and distribution expenses which were caused by an increase in doubtful debts provision and salaries.
The increase in finance cost is due to higher cost of borrowing incurred by the company.
9Transactions carried out with related parties during the nine months of the year 2012 are as follows:
a)Contract with Xeca, an associate company, amounting to SR 4.92 million for the IT services and SAP implementation.
b)Purchase contract for aluminum from an associate company, Midal Cables, amounting to SR 13.96 million.
c)Expenses at cost through Xenel, amounting to SR 2.60 million, are shared expenses on behalf of Saudi Cable Companys pertaining to fees to consultants/advisors and other business expenses
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