Letter from the Board of Directors
While the global economy has picked up since the pandemic-induced low in 2020 and 2021, global growth is still projected to continue to slow down in 2023.
According to the World Bank, growth is expected to decline 1.7% in 2023 due to growing risk of recession, higher interest rates and elevated inflation. This is expected to negatively impact businesses. Growth in oil exporting countries is expected to slow from 6.1% in 2022 to 3.3% in 2023.
In Kuwait, the Central Bank of Kuwait raised interest rates several times in 2022 to 3.5%. Investment spending allocation by the Government is down 15.2% to KD 2.4 billion (US$ 7.8 billion) for the fiscal year 2023-2024, despite this being the largest ever State budget to date.
At KIPCO, we remain cautious as we navigate through an environment that is impacted by high interest rates. And while many of our businesses have performed positively in 2022, we seek to protect the best interests of our shareholders by hedging to limit any future negative impact.
In 2022, KIPCO reported a net profit of KD 25.2 million (US$ 82.3 million), an increase of 44% from the KD 17.5 million (US$ 57.1 million) reported at the end of 2021. Total revenue from operations registered a 47% increase from KD 721 million (US$ 2.35 billion) for 2021 to KD 1.06 billion (US$ 3.5 billion) for 2022. Shareholder equity increased 81% from KD 325.8 million (US$ 1.1 billion) to KD 590.5 million (US$ 1.9 billion). Our consolidated assets increased 12% to KD 11.4 billion (US$ 37.2 billion) at the end of 2022, compared to KD 10.2 billion (US$ 33.3 billion) for the previous year.
To safeguard against the risks associated with interest hikes, KIPCO’s Board of Director has not recommended the distribution of dividend for the year. The Board of Directors will not receive a renumeration for the year, while the Executive Management remuneration stands at KD 1,596 thousand. It is worthy to note that the regulatory authorities have registered no penalties against the company.
During this year, we successfully completed the merger by amalgamation with Qurain Petrochemical Industries (QPIC).
A capital increase of 91.2% was executed in order to complete the conversion of QPIC shares to KIPCO at a swap ratio of 2.24. KIPCO’s total authorized, issued and paid-up capital now stands at KD 504.8 million (US$ 1.64 billion). The merger has created a stronger investment holding company that has the ability to pursue opportunities in new sectors and continue to support the growth of its existing portfolio, thereby creating
greater value for all of the shareholders.
As part of our strategy to proactively manage our liabilities, KIPCO signed a US$ 375 million (KD 115 million) 18-month senior unsecured credit facility with a group of six international banks in June. At the end of the year, we issued KD 165 million (US$ 539 million) six-year senior unsecured bonds, the largest KD-denominated issue to date, reflecting the confidence of investors in KIPCO’s underlying credit strength.
In 2022, Burgan Bank’s Board of Directors agreed to sell its majority stake in the Bank of Baghdad to Jordan Kuwait Bank. The sale of the 51.8% stake, which was completed in early 2023, resulted in a profit of KD 2 million (US$ 6.5 million) and will enhance Burgan’s CET1 by 70 basis points. Burgan also received a wealth management license and put in place a sustainable financing framework.
A highlight for Gulf Insurance Group (GIG) in 2022 was being awarded the Afiya 3 contract, worth KD 354.56 million (US$ 1.15 billion) for two years. The contract came into effect in September and provides health insurance services to around 156,000 retirees.
Our food and dairy manufacturing company, SADAFCO, began the construction of a depot in Mecca, replacing the existing rented location. It is expected to provide long-term infrastructure solutions to both the distribution and logistics operations, resulting in future cost savings and growth opportunities.
United Real Estate (URC), our real estate arm, merged by amalgamation with United Towers Holding and Al Dhiyafa Holding, thus enhancing its portfolio of income-generating assets. It also sold its stake in Kuwait Hotels Company, in line with URC’s strategy to focus on real estate development and investment. Construction is progressing in a timely manner in URC’s projects in Hessah Al Mubarak District, and both Hessah Towers and Byout Hessah are expected to be completed in the latter half of 2023.
Kamco Invest, our investment arm, successfully attracted over US$ 1.3 billion (KD 398 million) in investments for different products and transactions, and AUMs grew to US$ 13.8 billion (KD 4.2 billion). Kamco Invest’s equity funds and portfolios continued to outperform respective benchmarks and peers, and maintained their position among the top performing funds in Kuwait.
As for the National Petroleum Services Company (NAPESCO), it was awarded seven contracts totaling KD 28 million (US$ 91.4 million) during the year. These include services to Kuwait Oil Company and the Kuwait National Petroleum Company for support, oil well cementing, maintenance, as well as HSE support systems.
Over the past year, we continued to make progress in turning around OSN’s operations. Our streaming component has been rebranded OSN+ and the focus has been shifted to original content, Arabic productions and adaptations. The OSNtv box was launched late in the year, an all-in-one new product that brings together OSN exclusive and curated live tv channels, streaming and free-to-air entertainment across a single android device.
We launch into 2023 with a promising investment vision, having taken all the necessary measures to hedge against economic uncertainties of the global economic environment. In the meantime, our Group companies continue to strengthen their businesses and seek opportunities for sustainable growth.
We thank His Highness the Amir of the State of Kuwait, Sheikh Nawaf Al-Ahmad Al-Jaber Al-Sabah, and His Highness the Crown Prince, Sheikh Mishaal Al-Ahmad Al-Jaber Al-Sabah, for their continued support and guidance. We would like to thank you, our shareholders, for the support and trust you have placed in your Board of Directors and management during the past twelve months. We would also like to thank all the employees of KIPCO and its operating companies for the contribution they made during the year.
On behalf of our shareholders, we thank the management for the results they achieved during 2022. May God continue to grant us success and prosperity.