Tabuk Agricultural Development Company has announced that its board of directors approved the signing of an investment contract for the company's grape orchards with Ruwad Alsinaa Waltatweer Company. The agreement is intended to increase utilisation of existing assets and improve cash flow.
According to a statement published on Tadawul, the total value of the contract is SAR 23.3 million over the full contract period, excluding value-added tax. This is equivalent to approximately US$6.2 million.
The company stated that the grape orchard investment contract will run for 10 years and will be implemented through Ruwad Alsinaa Waltatweer Company. Under the agreement, the orchards will generate fixed rental income, contributing to cash flow stability and affecting financial performance indicators.
The contract involves investment in the grape orchards in two phases. The first phase covers 123 hectares and runs until 2029. The second phase expands the area to 196 hectares and continues until the end of the contract term.
Tabuk Agricultural Development Company reported that the grape segment has recorded accumulated losses over the past 10 years amounting to SAR 57.181 million, or about US$15.2 million, with an average annual loss of approximately SAR 5.7 million, equivalent to around US$1.5 million.
The company said the agreement is expected to improve the value of the orchards, which currently have a book value of SAR 8.5 million, or about US$2.3 million. Under the contract structure, the investor will assume responsibility for all operating costs related to the grape orchards throughout the duration of the agreement.
According to the company, the arrangement is designed to convert a loss-generating agricultural asset into a source of predictable rental income during the contract period.
Source: Maaal
