ANNUAL REPORT 2019 Realizing the Kingdom’s vision for the future
CONTENT
CHAIRMAN'S MESSAGE 04 CEO'S MESSAGE 06 SHAREHOLDERS 08 BOARD OF DIRECTORS 12 MANDATE & VALUES 14 INVESTMENT THESIS 16 SECTORIAL FOCUS 18 INDUSTRIAL METALS 20 DOWNSTREAM CHEMICALS 22 AUTOMOTIVE 24 POWER 26 INVESTMENT PORTFOLIO 28 ANNEX 32 GOVERNANCE 34 FINANCIAL STATEMENTS 44
DUSSUR ANNUAL REPORT 2019 1 KING SALMAN BIN ABDULAZIZ AL-SAUD HIS ROYAL HIGHNESS PRINCE MOHAMMED BIN SALMAN BIN ABDULAZIZ AL-SAUD
The Custodian of the Two Holy Mosques Crown Prince, Deputy Prime Minister and Minister of Defense of the Kingdom of Saudi Arabia
2 DUSSUR ANNUAL REPORT 2019 3 CHAIRMAN’S MESSAGE
During 2019, the Kingdom of Saudi This approach stems from our conviction Despite its short tenure, Dussur has Although this pandemic created Arabia made tangible progress and belief that such sectors will have developed significantly since its numerous challenges in the business towards realizing its vision of building the utmost impact in supporting and inception, giving us an exemplary and environment, it also presents new a diversified and flourishing economy. enabling transformative industries in unique operating model. This is evident opportunities which we intend to Moreover, Dussur has worked - since the Kingdom. in our highly capable management team carefully study and take advantage of its inception - towards being a key with extensive knowledge and experience through intelligent and coordinated contributor to this vision. Since its During 2019, Dussur was successful in in the industrial investment arena, in planning with our partners. launch in 2017, Dussur spared no effort adding another key investment to its addition to the significant support it to deliver on its mandate of building existing investment portfolio through enjoys from its key international and Finally, I would like to extend my sincere the Kingdom’s industrial landscape and our investment in establishing the highly reputable shareholders, namely, thanks and appreciation to the Kingdom supporting the pillars of our economy in Saudi Engine Manufacturing Company the Public Investments Fund, Saudi of Saudi Arabia’s visionary leadership for line with “Vision 2030”. (SEMCO) in partnership with Hyundai Aramco, and the Saudi Basic Industries their continued support to investors, in Heavy Industries (HHI), and Saudi Company (SABIC). general, and to the industrial investment Dussur’s talented and specialized team Aramco, to manufacture two-stroke sector specifically with due care focused on structuring and executing and four-stroke marine and Electric Notwithstanding the significant and guidance. This is evident in the impactful investments targeting the Power Plant (EPP) engines, and marine challenges the global economy faces recent government support initiative development of transformational pumps. These products will be used after the outbreak and repercussions announced in the first quarter of the industries. Dussur aims to enable the in propelling commercial sea vessels, of the COVID-19 pandemic, we are fiscal year 2020 to support the private private sector, technology transfer, electric power generation, cargo oil fully confident that we will continue sector in Saudi Arabia, providing a create sustainable jobs four the nation’s pumps, and offshore rig pumps. This our march towards achieving our clear indication of the attractiveness youth, and make a tangible contribution new addition will mark Dussur’s second mandate with the unparalleled of the investment environment in the to the Kingdom’s GDP. investment following its distinguished support we are getting from our wise Kingdom. Appreciation is also due to partnership with General Electric in the Government Leadership. In fact, the our shareholders for their continued We strive to continue our journey and area of gas-powered electric power recent developments only stand to support, my colleagues on the Board of develop new strategic partnerships generation turbines. show the importance of achieving self- Directors, and all Dussur team members founded on our principal approach of sustainability for key supplies. who exerted distinguished efforts in creating added value to our national 2019. I look forward to continuing Mr. Mohammed Abunayyan economy, forging strong partnerships, our journey to new achievements and Chairman and investing in transformative successes in 2020. industries in the key sectors charted in our strategy: industrial metals, specialty chemicals, automotive manufacturing, and power. DUSSUR IS BUILDING THE KINGDOM'S LANDSCAPE AND SUPPORTING THE PILLARS OF OUR ECONOMY.
4 DUSSUR ANNUAL REPORT 2019 5 CEO'S MESSAGE
Since its inception in 2017, the The efficacy of our strength stems In addition, in 2019 we focused striving in the process to contribute to shareholders of Dussur and its from our focus on a specific mandate on building and enhancing our the industrial goals stated in “Vision leadership paid great attention in of executing value-added investments distinguished human capital through 2030”, and outlined in the National laying the foundations of success for in the transformational industries, in several key strategic initiatives to Industrial Development and Logistics this thriving organization that carries the areas of industrial metals, such improve the working environment Program (NIDLP). We will move forward a pivotal mandate of developing the as, steel, aluminum, and titanium, and Dussur’s appeal to national talent diligently to develop vital industries transformational industries in the and the areas of specialty chemicals, seeking opportunities to enhance that will support the national economy, Kingdom; an industrial segment that is automotive manufacturing, and power. their skills and capabilities, and the provide promising industrial investment considered a key bottleneck in localizing In carefully utilizing these abilities, joy of success and appreciation for opportunities, and create thousands of the value chain in numerous critical and we contribute towards supporting achievements. sustainable jobs. strategic industries. local efforts to build a resilient and diversified national economy that Moreover, in spite of the enormous Finally, I would like to emphasize that In 2019, we exerted great efforts on complements the global economy. challenges facing the global economy our success in achieving the mandate all fronts to ensure that our strategy in light of the COVID-19 pandemic, bestowed upon us would not have and goals are aligned with and During the past year, we worked on Dussur’s team is working diligently and been possible with the valuable complementary to the Kingdom’s enhancing Dussur’s operational model purposefully to increase our institutional support we receive from our Board, “Vision 2030”. We also instituted a and restructuring the governance readiness to study all investment and our shareholders, and the efforts and working model that is based on the function in the organization. The operating risks, and reprioritize our work capabilities of our team, whom I thank best practices in the area of industrial company embarked on forming a fully- to find the best fitting opportunities in for their continued dedication to the investment both regionally and globally. fledged Enterprise Risk Management the current economic climate. vision of Dussur and effecting its This is what places Dussur today in an (ERM) function which will provide contribution to our national economy. advanced position and fully prepared a comprehensive risk management Moving forward, we will continue with to play the role of the strategic investor framework for Dussur and proactively our local and international partners to that enables the transformational manage operational and strategic risks, enable the development of industrial industries in the Kingdom. in addition to enhancing compliance metals, specialty chemicals, automotive with both internal and external manufacturing, and power sectors, Our key strength is embodied in our regulations. Dr. Raed Al-Rayes strategic investment approach, our highly Chief Executive Officer capable human capital, our portfolio size, and our international partnership network that is supported by the size and power of our shareholders.
WE WILL MOVE FORWARD DILIGENTLY TO DEVELOP VITAL INDUSTRIES THAT WILL SUPPORT THE NATIONAL ECONOMY.
6 DUSSUR ANNUAL REPORT 2019 7 Shareholders
Khurais Oil Plant
8 DUSSUR ANNUAL REPORT 2019 9 SHAREHOLDERS
ABOUT OUR SHAREHOLDERS Each founding shareholder offers Over many decades, Dussur’s exceptional value to Dussur beyond shareholders have been at the core of financial strength, with their Saudi Arabia’s industrialization journey, expertise, experience, insights, and playing a critical role in the economy networks, giving the company a and creating countless employment head-start in its mission to support opportunities. They have unparalleled the development and diversification experience of successfully working with objectives in Saudi Arabia. international partners to create world- class joint venture companies.
PUBLIC INVESTMENT FUND SAUDI ARAMCO* SABIC (SAUDI BASIC INDUSTRIES For more than 48 years, the Public Saudi Aramco is a fully integrated, global CORPORATION) Investment Fund (PIF) has been a petroleum and chemicals enterprise Ranked among the world’s largest leading economic player and has in Saudi Arabia. Over the past 80 petrochemical manufacturers, SABIC OVER MANY DECADES, DUSSUR’S contributed to the development of years, it has become a world leader in is a public company based in Riyadh, SHAREHOLDERS HAVE BEEN AT THE CORE national investment entities constituting hydrocarbons exploration, production, Saudi Arabia. 70% of the company’s the foundation for overall national refining, distribution, shipping, and shares are owned by the Saudi Arabian OF SAUDI ARABIA’S INDUSTRIALIZATION development, while contributing to the marketing, and the world’s top exporter government, with the remaining 30% establishment of many of the largest of crude oil and natural gas liquids is publicly held through its listing on JOURNEY. companies in Saudi Arabia. Established (NGLs). In 2019, Saudi Aramco offered the Saudi Stock Exchange (Tadawul). in 1971 by virtue of a Royal Decree, the 1.5% of its equity to be publicly held In 2019, Saudi Aramco and PIF entered PIF has, throughout the years, financed making it the world’s largest company into an agreement for Aramco to many key projects and companies and by market capitalization reaching in acquire the government’s stake of 70% provided financial support for projects excess of USD 2 trillion. Its oil and in SABIC. SABIC was established in 1976 of strategic importance to the national gas production infrastructure leads by virtue of a Royal Decree and today economy. The Public Investment Fund the industry in scale of production, has operations in over 50 countries seeks to become one of the largest operational reliability, and technical with a global workforce of over 35,000 *25% sovereign wealth funds in the world. To advances. Its plants and the people talented individuals. SABIC’s mission is achieve this goal, the Fund is building who run them make Saudi Aramco the to responsibly provide quality products a world-class diversified portfolio of world’s largest energy company. and services through innovation, 50% investments in attractive and long-term learning, and operational excellence opportunities at both the domestic and while sustaining maximum value for its international levels. stakeholders.
25%
*Saudi Aramco Development Company (SADCO), a wholly-owned subsidiary of Saudi Aramco, holds a 25% shareholding in Dussur. *Saudi Aramco Development Company (SADCO), a wholly-owned subsidiary of Saudi Aramco, holds a 25% shareholding in Dussur.
10 DUSSUR ANNUAL REPORT 2019 11 BOARD OF DIRECTORS
Mr. Mohammed Abunayyan Mr. David Bartholomew Mr. Fahad Al-Semari Chairman of the Board Member Member
Eng. Walid Abukhaled Eng. Fuad Mosa Mr. Waleed AlSaif Member Member Member
Mr. Abdullah Al Kobraish Mr. Turki Al Mady Mr. Hisham Attar Member Member Member
The capital and financial center of Saudi Arabia, Riyadh
12 DUSSUR ANNUAL REPORT 2019 13 MANDATE & VALUES
OUR MANDATE OUR VALUES
Dussur works through an effective and robust investment model with our partners in line with the best governance practices and standards on executing strategic industrial projects that contribute towards accelerating the localization of the value chains of key industrial sectors. These sectors include FAIRNESS RESPECT industrial metals, specialty chemicals, automotive manufacturing, and power industries, as well as, other industries that Dussur aims to use to create sustainable jobs for our nation’s youth, facilitate technology transfer, and increase the private sector participation in the Kingdom’s GDP in line with Vision 2030 that aims to diversify the EXCELLENCE PARTNERSHIP local economic base.
New Dussur Office, Riyadh Front
14 DUSSUR ANNUAL REPORT 2019 15 INVESTMENT THESIS Investment Thesis Dussur occupies a unique By investing in these sectors strategic position in the and building technical Kingdom of Saudi Arabia capabilities, we aim to create as a long-term investor companies that catalyze the in industrial projects. that development of the industrial realize the ambitions of ecosystem and capitalize on Vision 2030 with the backing the key competitive advantages of distinguished shareholders of the Kingdom. We also aim and other government to facilitate knowledge transfer, stakeholders. Dussur bring global skills to the local aims to develop industrial workforce, create high-quality projects that will contribute jobs, spur innovation and to the economic growth research, and deliver value and diversification of the to our shareholders. Kingdom’s industrial base. Dussur’s investment philosophy is to develop sustainable industrial capabilities while adhering to strict commercial discipline in four key sectors: industrial metals, downstream chemicals, automotive manufacturing, and power.
16 DUSSUR ANNUAL REPORT 2019 17 Sectorial Focus
Saudi Arabia The heart of the Arab and Islamic worlds The investment powerhouse The hub connecting three continents
18 DUSSUR ANNUAL REPORT 2019 19 SECTORIAL FOCUS Industrial Metals The Kingdom is blessed secondary upstream, and with a rich endowment of metal recovery, aiming to metals and minerals that can both localize and integrate spearhead the development targeted investments in the of competitive value global supply chain and chains serving a multitude bring leading technologies of advanced industries. and capabilities to support Building on the Kingdom’s Vision2030 industrial mining strategy, Dussur aims diversification. Focusing on to complement existing titanium, aluminum, specialty upstream capabilities steel, zinc and copper, and by filling gaps, creating high value alloy agents, competitive advantages, Dussur will play a critical role and enabling strategic in further developing long sectors in specialty metals term sustainable high-value and base metals. The industries such as aerospace, value chain focus is in conventional power, mid-stream, downstream, renewables, automotive, and oil and gas, among others.
20 DUSSUR ANNUAL REPORT 2019 21 SECTORIAL FOCUS Downstream Chemicals The chemicals sector is Dussur will seek to partner already a mega-sector with existing facilities within the Kingdom with within the value chain for a complex value chain. In potential synergies, evaluate the downstream chemicals opportunities to create sector, Dussur is targeting industrial clusters, and investments in detergents collaborate with the private and surfactants, polymer sector to build on existing additives, polymer capabilities and extend the processing, and CASE value chain offering. (Coatings, Adhesives, Sealants, and Elastomers). These investments aim to fill gaps in industries such as electronics, aircrafts, healthcare, packaging, construction, and pharmaceuticals.
22 DUSSUR ANNUAL REPORT 2019 23 SECTORIAL FOCUS Automotive
To support the Kingdom’s non-manufacturing areas. vision to establish an Specifically, Dussur will automotive manufacturing focus on raw materials, capability in Saudi Arabia, parts and systems, vehicles, Dussur targets investing with and application building partners to manufacture for private vehicles, special special purpose vehicles, purpose vehicles, and buses. buses, trucks, and vans, in addition to localizing cross-segment OEMs, and supply base subsectors. Balancing its investment view between conventional and emerging technologies, Dussur will seek to capitalize on opportunities across the automotive value chain in both manufacturing and
24 DUSSUR ANNUAL REPORT 2019 25 SECTORIAL FOCUS Power
Saudi Arabia has one of the Dussur is investing in largest installed generation gas turbine components capacity globally with manufacturing, finishing, approximately 77 Giga assembly, testing, and Watts of installed base, and services. Saudi Arabia is has recently revalidated its a large and growing gas commitment to increase turbine market. Dussur capacity to reach more aims to develop the than 115 Giga Watts of manufacturing and services conventional generation industry with strategic by 2030. Heavy duty gas investments across the turbines are the most value chain and integrate essential power production the services and component units within the combined manufacturing. Hence, cycle power plants most Dussur’s strategy for the commonly used in Saudi power sector represents Arabia. forward integration and increased in-Kingdom value creation.
26 DUSSUR ANNUAL REPORT 2019 27 Investment Portfolio
GESAT Factory, Dammam From left to right: Eng. Fatimah Alibrahim, Lead Materials Planning & Execution Specialist; Ahmed Alabdulaziz, Store Keeper; Eng. Ibrahim Alshuwaier, Operations Leader.
28 DUSSUR ANNUAL REPORT 2019 29 INVESTMENT PORTFOLIO Dussur's Dussur's Joint Ventures (JVs) Partners
GENERAL ELECTRIC SAUDI SAUDI ENGINE MANUFACTURING ADVANCED TURBINES (GESAT) COMPANY (SEMCO) SAUDI ARAMCO Dussur, Saudi Aramco, and Hyundai Based in Dhahran, Saudi Arabia, Saudi Aiming to satisfy the Kingdom of Heavy Industries (HHI) signed a joint Aramco is the leading producer of energy Saudi Arabia’s growing electricity venture in July 2019 to establish the first and chemicals in the world. demands, GE Saudi Advanced Turbines marine engine manufacturing facility (GESAT) is a joint investment by in the MENA region. The venture will Dussur and General Electric (GE) to manufacture 2-stroke and 4-stroke manufacture heavy duty gas turbines marine and Electric Power Plant (EPP) and components in the Kingdom. engines, as well as, marine pumps that Established in June 2017, GESAT aims powers vessels, auxiliary equipment, GENERAL ELECTRIC (GE) to satisfy Saudi Arabia’s annual demand generators, and propulsion systems. The An American multinational conglomerate for gas turbines. Under the agreement, engines manufactured will also be used in and a world leader in power generation GE and Dussur are strengthening commercial vessels propulsion, electrical and water technologies for utilities, ‘Made in Saudi’ capabilities by power generation, cargo oil pumps, and independent power producers, and expanding manufacturing processes offshore rig pumps. Located at Ras AlKhair industrial applications. specifically around gas turbine in the Kingdom’s Eastern Province, the component technology, including manufacturing facility will benefit from the GE’s H-class heavy duty gas turbines, Kingdom’s strategic geographic location at enabling operational efficiency and the crossroads of important international flexibility. trade routes between three continents and HYUNDAI HEAVY INDUSTRIES CO, LTD represents another step to cement the Kingdom’s position as a unique regional Founded in 1972, HHI is the world's largest logistical hub for global seaborn trade. shipbuilding company. Its headquarters are The venture is expected to create over in Ulsan, South Korea. 720 jobs and will encourage the transfer of knowledge and industry know-how to Saudi Arabia. The joint venture was signed with Saudi Aramco Development Company (SADCO) set to own 55 percent of its shares, while Dussur will own 15 percent, and Korea Shipbuilding & Offshore Engineering (KSOE) is to own 30 percent (KSOE is a sub-holding company under Hyundai Heavy Industries (HHI) Holding).
30 DUSSUR ANNUAL REPORT 2019 31 Contact us Riyadh Front - Building N4 P.O Box 47340 9462 - King Khalid International Airport Road Riyadh 13413 - 3686 Kingdom of Saudi Arabia
Tel: +966 11 826 5093 Email: [email protected] Website: www.dussur.com