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Saudi Maaden Seeks to Acquire Meridian Fertilizer Group

Saudi Maaden Seeks to Acquire Meridian Fertilizer Group
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Saudi Maaden Seeks to Acquire Meridian Fertilizer Group

Saudi Maaden Seeks to Acquire Meridian Fertilizer Group

Saudi Arabia's largest mining company, Maaden, seeks to complete the first global acquisition of Africa’s Meridian Fertilizer Group. The process is expected to be completed during the third quarter of 2019.

Maaden revealed that this step is significant in its strategy to build global distribution channels of fertilizers.

Separately, Maaden reported its financial results for the second quarter of 2019. The company recorded a net loss of SAR590 million (USD157.5 million) compared to a profit of SAR630 million (USD168 million) in Q2 2018.

The report added that the loss is mainly attributed to decreasing commodity prices, which affected the year-on-year profit by SAR481 million (USD128.2 million), and one-time costs associated with the restructuring of its Maaden Rolling Company (MRC) business which amounted to SAR159 million (USD42.3 million).

The company’s profitability was also affected by higher input costs, operating expenses including fixed costs, general and administrative costs, selling and marketing, and finance costs, caused by the full recognition of the operating costs of Maaden, Waad al Shamal Phosphate Company (MWSPC) and Maaden Rolling Company (MRC), which commenced commercial operations in December 2018.

Despite losses incurred in Q2 2019, revenue increased by 26 percent, reaching SAR4.3 billion (USD1.1 billion) compared to SAR3.4 billion (USD906 million) in Q2 2018. The increase in revenue resulted primarily from an increase in sales volume of ammonium phosphate fertilizer and aluminum flat-rolled products, as MWSPC and MRC reached full commercial operations.

Cash generated from operations was SAR545 million (USD145.3 million) in Q2 2019, up by 25 percent when compared to the previous quarter.

Maaden reported earnings before interest, tax, depreciation and amortization (EBITDA) of SAR1.3 billion (USD346.6 million), a decrease of 29 percent compared to the same quarter last year.

Among the factors influencing the financial data: an increase in power costs for its aluminum smelter due to the recognition of the full power cost of the Saline Water Conversion Corporation (SWCC) power plant, which supplies the smelter.

Commenting on the results, Maaden President and CEO Darren Davis said: “The second quarter of 2019 showed further weakness in our core commodities, phosphate, and aluminum, with prices continuing downward trends since 2018, although gold prices remained strong.”

“Aluminum prices remain under pressure as a result of continued uncertainty over the global trading environment, however, the transaction to restructure our MRC business is proceeding as planned and will ensure the long-term sustainability of the business,” he continued.

“Phosphate fertilizers weakened due to higher exports from China. Our MWSPC project made further good progress in the second quarter in ramping up operations and across the business, production in most of our units reached record highs. Whilst market challenges are likely to continue, production will reach record levels in 2019 and we have renewed our focus on operational excellence,” Davis continued.

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Firm Dollar Keeps Pound, Euro and Yen Under Pressure

US Dollar and Euro banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/ File Photo
US Dollar and Euro banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/ File Photo
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Firm Dollar Keeps Pound, Euro and Yen Under Pressure

US Dollar and Euro banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/ File Photo
US Dollar and Euro banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/ File Photo

The US dollar charged ahead on Thursday, underpinned by rising Treasury yields, putting the yen, sterling and euro under pressure near multi-month lows amid the shifting threat of tariffs.

The focus for markets in 2025 has been on US President-elect Donald Trump's agenda as he steps back into the White House on Jan. 20, with analysts expecting his policies to both bolster growth and add to price pressures, according to Reuters.

CNN on Wednesday reported that Trump is considering declaring a national economic emergency to provide legal justification for a series of universal tariffs on allies and adversaries. On Monday, the Washington Post said Trump was looking at more nuanced tariffs, which he later denied.

Concerns that policies introduced by the Trump administration could reignite inflation has led bond yields higher, with the yield on the benchmark 10-year US Treasury note hitting 4.73% on Wednesday, its highest since April 25. It was at 4.6709% on Thursday.

"Trump's shifting narrative on tariffs has undoubtedly had an effect on USD. It seems this capriciousness is something markets will have to adapt to over the coming four years," said Kieran Williams, head of Asia FX at InTouch Capital Markets.

The bond market selloff has left the dollar standing tall and casting a shadow on the currency market.

Among the most affected was the pound, which was headed for its biggest three-day drop in nearly two years.

Sterling slid to $1.2239 on Thursday, its weakest since November 2023, even as British government bond yields hit multi-year highs.

Ordinarily, higher gilt yields would support the pound, but not in this case.

The sell-off in UK government bond markets resumed on Thursday, with 10-year and 30-year gilt yields jumping again in early trading, as confidence in Britain's fiscal outlook deteriorates.

"Such a simultaneous sell-off in currency and bonds is rather unusual for a G10 country," said Michael Pfister, FX analyst at Commerzbank.

"It seems to be the culmination of a development that began several months ago. The new Labour government's approval ratings are at record lows just a few months after the election, and business and consumer sentiment is severely depressed."

Sterling was last down about 0.69% at $1.2282.

The euro also eased, albeit less than the pound, to $1.0302, lurking close to the two-year low it hit last week as investors remain worried the single currency may fall to the key $1 mark this year due to tariff uncertainties.

The yen hovered near the key 160 per dollar mark that led to Tokyo intervening in the market last July, after it touched a near six-month low of 158.55 on Wednesday.

Though it strengthened a bit on the day and was last at 158.15 per dollar. That all left the dollar index, which measures the US currency against six other units, up 0.15% and at 109.18, just shy of the two-year high it touched last week.

Also in the mix were the Federal Reserve minutes of its December meeting, released on Wednesday, which showed the central bank flagged new inflation concerns and officials saw a rising risk the incoming administration's plans may slow economic growth and raise unemployment.

With US markets closed on Thursday, the spotlight will be on Friday's payrolls report as investors parse through data to gauge when the Fed will next cut rates.