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Shaker reports SAR 10.1 million net profit in a first profitable year since 2016

Shaker (“Al Hassan Ghazi Ibrahim Shaker Co.”, the “Company” or the“Group”), Saudi Arabia’s leading importer, manufacturer, and distributor of AirConditioners and Home Appliances, has announced its first profitable year since2016. Financial Results for the 12-month period ended 31 December 2020 showed full-year revenue of SAR 932.7 million, growing by 5.6% as compared to 2019. The gross profit of SAR 195.6 million increased by 18.1% year-on-year. Shaker’s 12-month net profit reached SAR 10.1 million, a significant improvement from a net loss of SAR 50.9 million in 2019.

Management attributes stable and improving revenues, the success and completion of the Breakthrough Program turnaround strategy, and the Company’sagile and proactive response to Covid-19 for achieving profitability. In 2020, Shaker completed all the goals set out by the Breakthrough Program, which has achieved significant operational and structural efficiencies.

Mohammed Ibrahim Abunayyan, Chief Executive Officer at Shaker, said:

“Our return to healthy financial performance is a clear indication of the positive impact the Breakthrough Program has had on our business. Despite the challenges posed by Covid-19, by remaining committed to the pillars of the strategy we delivered profitability for the first time since 2016; maintained strong revenue growth and reduced costs, and cemented our relationships with stakeholders across the supply chain. In the course of 2020, we welcomed a new home appliances brand to our portfolio, and achieved growth in our projects business by embracing opportunities created by Saudi Vision 2030 and government-sponsored megaprojects.”

“While the events of 2020 created challenges for our supply chain, with inventory pressures in some categories, and in manufacturing, with shortages of components parts delaying production, we acted quickly to mitigate the impact of the pandemic, safeguarding inventory and reassessing our manufacturing processes. This was a clear demonstration of our ability to navigate headwinds.”

Profitable FY performance in focus

  • Total revenue of SAR 932.7 million improved by 5.6% from 2019
  • Gross profit of SAR 195.6 million improved by 18.1% year-on-year
  • Operating profit of SAR 12.1 million improved from a loss of SAR 38.4 million
  • Net profit of SAR 10.1 million improved from a loss of SAR 50.9 million in 2019

“Having delivered our objectives, with an improved operating structure in place, a pool of talented and driven staff, and a lean business model, we are pleased to be launching our new growth strategy, which aims to make Shaker the market leader in ACs, consumer electronics, and appliances. With the turnaround process complete we are ready to focus on growing market share across the segments we operate in, expanding to new segments to meet consumer needs, and defend our position in segments where we are the supplier of choice. These goals will be supported by initiatives to improve our product mix, increase efficiencies across our distribution channels, and digitalize our business, particularly e-commerce channels.”

Breakthrough Program completion

The BreakthroughProgram was completed in 2020, having achieved the following outcomes during the year:

Core
Business
Turnaround  
Sales revenue in Saudi Arabia increased by 8.1% year-on-year
Employee costs in Saudi Arabia were optimized and reduced, decreasing by 14.1% from 2019Operating income for Saudi Arabia reached increased 112% to SAR 5.8 million
Talent Upgrade Plan Completed roll-out of Talent Upgrade Plan at senior level, and restructuring of sales organization modelThe HR structure is evaluated and revisited on an ongoing basis 
Performance Infrastructure   Performance Management System established across Company Execution and tracking of key turnaround initiatives conducted on an ongoing basis
Strategic Moves Extension of agreements with key principals completed
Ongoing collaboration with principals on new strategic
initiatives  

Outlook and strategy

Shaker will now implement its new strategy until 2023, which aims to grow the business by becoming the preferred choice for customers and the ideal partner for brands in the Saudi consumer electronics and appliances sector. The strategy follows the success of the Breakthrough Program, which was completed in 2020 and saw Shaker achieve profitability for the first time since 2016.

Shaker will build on its extensive portfolio of home appliances and ACs, to take advantage of emerging opportunities in the market. Saudi Arabia’s AC market is expected to grow by 2% in the next two years, with growth supported by energy efficiency programs by the government including the Saudi Energy Efficiency Center’s (“SEEC”) high-efficiency AC initiative, and Tarsheed, the Saudi government’s National Energy Services Company. Megaprojects such as Neom and Red Sea also present compelling opportunities. The home appliances market is expected to grow by 3% in the next three years driven by consumer demand for energy-efficient products, increasing disposable income as more women enter the workforce, and a strong pipeline of housing projects supported by the Saudi government.

Covid-19 impact and response

The Board and management have continued to address the impact of the Covid-19 pandemic and put in place mitigating plans. Shaker and its dealers were successful in pivoting sales and distribution to alternative channels, alleviating pressure on traditional retail, although some projects faced delays. With the easing of preventive measures and the gradual return of normal economic activity, sales generally improved to levels stronger than those achieved in 2019. Throughout the pandemic crisis, the Group has acted quickly to utilize available private sector support packages, actively manage down fixed and variable costs, shore up working capital, and maintain operations at optimal capacity.

Given the fluidity of the pandemic situation both locally and internationally, it is not possible to make accurate forecasts for its future impact on performance. Further updates regarding material developments in relation to Covid-19 will be provided by the Company, as required.

Shaker, which is listed on Tadawul (symbol: SHAKER), is a leader in the Saudi market as both a distributor for international electrical brands and a local manufacturer of LGAir Conditioners. The Company’s portfolio brands include LG Air Conditioners, as well as Indesit, Ariston, Maytag, Midea, and Bompani in the home appliances segment. In 2015, the Group increased its stake in the UAE’s Emirates EnergyManagement Services (EMS) from 20% to 74%, and in establishing ESCO, as a business unit of Shaker Group, took an important strategic step towards diversifying operations and revenue streams.

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