MEPCO Q2FY26: Despite mixed regional conditions, growth in Saudi Arabia and Asia helped partially offset weaker performance in other markets; firmly on track with PM5 and TM6

MEPCO Q2FY26: Despite mixed regional conditions, growth in Saudi Arabia and Asia helped partially offset weaker performance in other markets; firmly on track with PM5 and TM6

The Pulp and Paper Times

MEPCO is the leading, vertically integrated paper manufacturer in the Middle East, offering a diverse range of containerboard and specialty paper products for the packaging, construction, furniture, and paper core industries worldwide, with a growing global footprint spanning over 40 countries, including across the Middle East, South Asia, the Americas, and Europe.

Since MEPCO’s establishment over 2 decades ago, the Company has steadily evolved to become a key contributor to the Kingdom’s industrial and environmental landscape, building a strong legacy in paper production and recycling. At the heart of our journey lies a firm commitment to the principles of the circular economy; transforming waste into valuable resources and supporting sustainable industrial development, closely aligned with Saudi Arabia’s Vision 2030, which emphasizes environmental responsibility, resource efficiency, and economic diversification.

The Company delivered a robust performance in the second quarter of 2026, supported by evolving market dynamics. Revenue reached SAR 298.0m, representing an 8% growth compared to Q2 2025, primarily driven by a 17% increase in sales of containerboard and industrial papers. This growth reflected the Company’s continued focus on enhancing its product mix, strengthening market positioning, and increasing market share. Despite mixed regional conditions, growth in Saudi Arabia and Asia helped partially offset weaker performance in other markets. The Company prioritized local markets and Asia (specifically surrounding countries where freight expenses do not affect pricing competitiveness) during the period, as higher fuel prices increased freight costs and made exports to other regions less competitive. Gross profit stood at SAR 56.5m, with gross margin improving to 19% from 13% in the prior-year period, supported by stronger sales performance and the Company’s ability to secure essential materials despite ongoing regional disruptions. Ongoing cost optimization initiatives, including lower selling and distribution expenses and the reversal of impairment losses on financial assets, contributed to operating profit rising to SAR 20.4m. Net profit for the period increased to SAR 15.3m, further supported by lower finance costs and zakat expense. In parallel, the Company remained on track to launch its two flagship projects, PM5 and TM6, and invested SAR 238.9m in capital work-in-progress during the period. Operating cash flow remained positive in line with business performance, while increased borrowings supported the Company’s strategic growth investments and future capacity expansion plans, while keeping leverage within healthy levels. 

H1 2026 result 

MEPCO delivered a resilient performance in the first half of 2026, achieving revenue of SAR 542.3m, representing a 2% increase compared to H1 2025. The growth was primarily driven by an 8% increase in sales of containerboard and industrial papers, supported by optimal product mix. Lower cost of revenue, combined with higher sales, contributed to an increase in gross profit to SAR 83.1m from SAR 71.0m in the prior-year period. Operating profit stayed at almost the same level at SAR 25.1m, as a result of reduction in selling and distribution expenses. These improvements were offset by lower other operating income, higher impairment losses on financial assets and general and administrative expenses. Net profit for the period increased to SAR 13.9m from SAR 10.3m in H1 2025, benefiting from lower finance costs and a significant reduction in zakat expense, although the increase was partially tempered by lower finance income. The Company continued to focus on operational efficiency and cost optimization while maintaining progress on its strategic growth initiatives, supporting its longterm value creation objectives.

“The second quarter of 2026 marked a positive improvement in the Company’s performance, supported by stronger sales and continued focus on operational efficiency. The results were good enough to offset the drawback from Q1 2026. Revenue increased by 8% year-on-year to SAR 298.0 million in Q2, contributing to H1 revenue growth of 2% to SAR 542.3 million. The improvement in sales, particularly in containerboard and industrial papers, together with an improved product mix and disciplined cost management, supported a significant improvement in profitability, with Q2 gross margin increasing to 19% compared to 13% in the prior year period.

“We continued to make meaningful progress in our strategic investment program, with the PM5 and TM6 projects remaining on track to commence soft operations by late 2027. The Company invested SAR 238.9 million in capital work-in-progress during the period, reflecting our continued commitment to expanding capacity, enhancing operational resilience, and strengthening our product offering. At the same time, we maintained our focus on cost optimization and operational efficiency, supporting improved profitability despite evolving market conditions. Efficient inventory management resulted in decreasing inventory levels by more than 30% positively contributing to our Cash Conversion Cycle.

“Our priority remains to build on this momentum while maintaining a disciplined approach to growth and capital allocation. We will continue to capitalize on our high and flexible production capacity that enables us to strengthen our market position, optimizing our cost base, improving operational performance, and advancing our strategic investments. With the progress achieved during the first half of the year and our planned capacity expansion, we remain confident in our ability to capture future market opportunities and deliver sustainable long-term value for our shareholders.” Faisal Haddawi, Chief Executive Officer of the Middle East Paper Company, commented.

“The first half of 2026 demonstrated the resilience of our business and the strength of our strategic direction. Against a dynamic market backdrop, MEPCO delivered growth in revenue and profitability, supported by stronger sales, an improved product mix, disciplined cost management, and continued focus on operational efficiency. We remain firmly on track with our two flagship projects, PM5 and TM6, which will expand production capabilities, strengthen operational resilience, and position the Company to capture future market opportunities. These investments reflect our confidence in MEPCO’s long-term fundamentals and our commitment to disciplined capital allocation.” Mr. Musab Sulaiman Al-Muhaidib, Chairman of the Board of Directors of the Middle East Paper Company, stated.

Looking ahead, our priorities remain clear; to drive operational excellence, strengthen our market position, optimize costs, advance our sustainability agenda, and execute our strategic investments with discipline. We are confident in our ability to build on the progress achieved and enter MEPCO’s next phase of development as a stronger, more resilient, and future-ready organization. We remain committed to supporting the Kingdom’s industrial and environmental ambitions while delivering sustainable, long-term value to our shareholders and stakeholders.
 

Published at : Oct 12, 2026 08:24 AM (IST)

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