Currency: A Comprehensive Explanation of Its Concept and Importance in the

Currency forms the backbone of any modern economy; it is the primary tool that facilitates trade between individuals, companies, and nations. By definition, currency refers to any monetary unit officially recognized by the monetary authorities of a specific country and used as a standardized medium for exchange. Currencies vary between paper money (such as the Saudi Riyal or the US Dollar), coins, and digital or cryptocurrency, which have gained increasing importance in recent years. Currency performs several key economic functions: first, it serves as a medium of exchange, allowing individuals and businesses to buy and sell goods and services easily without resorting to barter. Second, currency acts as a store of value, enabling individuals to hold it until they need to spend, making it a tool for wealth preservation. Third, currency is a unit of account, facilitating the comparison of prices for different goods and services and determining profits and losses in companies. Finally, currency is used as a unit for deferred payment, allowing for commercial and financial transactions that require future payment. In Saudi Arabia, the Saudi Riyal represents the official national currency, and its value against foreign currencies is determined through policies linking the currency to the US Dollar, providing significant stability in exchange rates. This stability, in turn, enhances the confidence of both local and foreign investors in the Saudi market and stimulates business activity. Moreover, the diversity of currency types worldwide, from hard currencies like the Euro and Dollar to digital currencies like Bitcoin, adds a new dimension to financial transactions, requiring major companies like SIGMIX to understand currency market dynamics to make sound financial decisions. Thus, it is clear that currency is not merely a means of payment but a strategic element in both macro and microeconomics, affecting all aspects of financial and commercial life.

Currency has undergone significant evolution throughout history, beginning with humanity's journey with money through a barter system, where goods were exchanged directly without a monetary intermediary. Over time, the need for a standardized, divisible, and recognized medium of value emerged, leading to the introduction of coins made from precious metals like gold and silver. These coins were used for centuries due to their durability and intrinsic value. In the Middle Ages, paper currency began to emerge, where banks would hold gold and issue cash receipts as substitutes, paving the way for the introduction of paper money. With the evolution of banking systems, paper currency became the accepted medium of exchange, supported by the trust of society and financial institutions. In the twentieth century, the world witnessed significant transformations in currency systems, especially with the collapse of the Bretton Woods system in the 1970s, which linked currencies to the US Dollar and gold. Subsequently, most countries adopted flexible or pegged exchange rate systems, such as pegging the Saudi Riyal to the US Dollar. In modern times, digital currencies like Bitcoin and Ethereum have emerged, relying on blockchain technology and enabling decentralized trading without central bank intervention. In the Saudi context, the Riyal evolved from being a coin currency during the Ottoman era to an official paper currency issued by the Saudi Arabian Monetary Authority and managed according to conservative monetary policies. This evolution has contributed to enhancing economic stability and supporting development projects. Today, currency remains one of the vital factors in the global economy, playing a central role in capital movement, company valuation, and determining inflation levels and interest rates. This historical evolution reflects the ongoing need for advanced and flexible monetary systems that respond to changing market demands, requiring companies and financial institutions to keep pace with these transformations to ensure the sustainability of their operations in an ever-changing economic environment.

Exchange rate systems are fundamental pillars that determine the value of the national currency against foreign currencies and form the basis for the stability of local and international financial markets. There are several types of exchange rate systems, the most notable being the flexible system, where the value of the currency is determined by supply and demand in the foreign exchange markets, and the fixed system, where a country pegs its currency to a strong currency like the US Dollar or a basket of currencies. In the case of Saudi Arabia, the government has adopted a policy of pegging the Saudi Riyal to the US Dollar for decades, with the exchange rate fixed at approximately 3.75 Riyals per Dollar. This peg provides a high degree of economic stability and reduces exchange rate fluctuations that could negatively impact foreign trade and foreign investment. This system has several advantages, including protecting the local economy from global market fluctuations, reassuring investors about the stability of their investments, and facilitating cost and revenue forecasting for Saudi companies that rely on imports or exports. Conversely, this system requires the central bank to maintain large cash reserves to intervene in the market when necessary and maintain the fixed exchange rate. It also limits the government's ability to use monetary policy flexibly in response to economic crises, as it must always consider maintaining the peg to the Dollar. For major companies like SIGMIX, the currency peg provides a favorable environment for long-term financial planning, allowing them to anticipate costs and revenues without worrying about sharp exchange rate fluctuations. However, any sudden changes in the monetary system or external economic pressures may require a swift response from companies to adjust their financial strategies. This peg model reflects Saudi Arabia's direction toward achieving monetary stability that supports sustainable economic development and enhances investor confidence in the local market.

Currency plays a pivotal role in managing the macroeconomy, directly affecting inflation rates, economic growth, and the state's monetary policy. Inflation is the continuous rise in the general price level, often associated with a decline in the purchasing power of the currency. When the value of the local currency decreases, the prices of imported goods rise, putting pressure on the cost of living and affecting company profits. Conversely, a strong currency contributes to price stability and supports economic growth by enhancing confidence in the financial system. Central banks resort to monetary policy tools such as controlling interest rates and open market operations to achieve currency stability and regulate inflation rates. For example, the Saudi central bank may raise interest rates or sell Dollars in the market to support the Riyal when inflationary pressures arise. Economic growth is also closely linked to currency stability, as a stable monetary environment encourages increased local and foreign investments and business expansion. Companies operating in construction sectors like SIGMIX rely on currency stability to control the costs of imported materials, such as machinery or fuel, and to ensure sustainable profit margins. In cases of rising inflation or loss of currency value, companies face challenges in managing costs and liquidity, which may reflect on their ability to distribute profits. Additionally, currency policies affect the country's balance of payments, as a weak currency increases the competitiveness of exports but raises the cost of imports. For Saudi Arabia, the stability of the Riyal is one of the most important priorities of monetary policy, as it supports Vision 2030 and enhances the position of the Saudi financial market globally. Thus, it is clear that currency is not merely a medium of exchange but a strategic tool for managing the macroeconomy and achieving long-term financial stability.

Currency plays an important role in determining the financial performance of listed companies, as currency fluctuations affect their revenues, costs, and final profits. In the case of Saudi companies like SIGMIX, most revenues and expenses are linked to the Saudi Riyal, but some elements may be affected by changes in foreign currency exchange rates, especially when importing equipment or raw materials or dealing with international companies. If the exchange rate of the Riyal rises against the Dollar or Euro, the cost of imports decreases, improving profit margins. Conversely, if the Riyal weakens, costs may rise and pressure profits. For stock prices, the market reflects investors' expectations regarding a company's ability to achieve future profits under prevailing economic conditions, including currency stability. For example, if the Saudi economy faces pressures on the Riyal or investors expect changes in exchange rate policy, this may be reflected in stock prices through increased future risks. Similarly, companies with supply or export contracts in Dollars or foreign currencies may benefit or suffer from currency market fluctuations, which directly impacts their quarterly results and stock price. In the cement sector specifically, companies like SIGMIX primarily depend on local demand, but any change in fuel prices or imported materials due to currency fluctuations reflects on production costs. Ultimately, currency stability enhances investor confidence in companies' ability to maintain sustainable profitability levels and reduces risks associated with their investments in local stocks. For this reason, companies and investors closely monitor any developments in currency policies or exchange rates due to their direct impact on financial forecasts and stock values.

Currency fluctuations significantly affect the profits of companies listed in the Saudi financial market, especially those that partially or fully rely on imports or exports. When the local currency is stable, it is easier for companies to forecast costs and revenues, supporting their ability to plan financially and distribute dividends to shareholders. Conversely, if the local currency experiences a decline against foreign currencies, the cost of importing raw materials and equipment rises, which can lead to reduced profit margins or even losses during certain periods, as seen with some cement companies during periods of rising energy prices or currency exchange rate changes. For companies like SIGMIX, cash dividend distribution depends on annual financial performance, which is in turn affected by currency stability and operating costs. For instance, in 2024, the company distributed cash dividends of 10 Riyals per share, benefiting from the stability of the Saudi Riyal, which allowed it to control costs and achieve suitable operating profits. However, during periods of currency pressures or rising production costs, distributions may shrink or profits may be reinvested to strengthen the company's financial position. On the other hand, the strength of the local currency contributes to attracting foreign investments, as investors are reassured about the stability of returns in local currency and are not exposed to sharp fluctuations. Additionally, currency stability facilitates companies' expansion into new projects or upgrading production lines without worrying about exchange rate risks. Thus, it is clear that currency is not merely a financial tool but a strategic factor affecting Saudi companies' ability to achieve profits and provide attractive returns to shareholders, making monitoring currency policies and exchange rates an essential part of sound financial management in major companies.

The cement sector in Saudi Arabia is a vital sector closely linked to the movement and stability of the local currency. Currency plays a crucial role in determining production costs, product prices, and profit margins for cement companies, given the sector's reliance on importing certain equipment and operational materials and the volatility of energy prices. In the case of SIGMIX, which focuses its operations in northern Saudi Arabia, the stability of the Saudi Riyal at a fixed level against the US Dollar provides a favorable financial environment for long-term planning and pricing. For example, in 2024, the strength of the Riyal enabled the company to maintain reasonable import costs for materials and equipment, despite global pressures on energy prices. Additionally, currency stability contributed to reducing the risks of fluctuations in the exchange rates of imported inputs, positively reflecting on the company's financial results and its ability to distribute profits to shareholders. However, challenges arise when energy prices change or the currency faces external pressures at the regional or global level, as production costs may rise and affect the company's profitability. Furthermore, Saudi cement companies compete in a regional market experiencing fluctuations in currency prices, which may affect the competitiveness of exports. If the value of the Riyal rises against the currencies of neighboring countries, Saudi cement products may become less competitive in foreign markets. Conversely, if the Riyal weakens, exports may increase but imported costs may rise. Thus, it is clear that managing currency and exchange rates is an important part of the strategy of major companies in the cement sector, including SIGMIX, and plays a pivotal role in achieving financial sustainability and maintaining local and regional market share.

Government policies play a significant role in supporting currency stability and attracting local and foreign investments to the Saudi market. The Kingdom has relied on a policy of pegging the Saudi Riyal to the US Dollar for decades, providing monetary stability that has contributed to enhancing investor confidence and stimulating economic growth. This monetary stability allows the government and companies to plan long-term without fear of sharp fluctuations in exchange rates, and it facilitates foreign investors' evaluation of their returns on investments in local currency. Additionally, the Saudi government implements conservative financial and monetary policies to maintain large cash reserves, enabling it to intervene when necessary and support the currency's value during crises. The state also aims, through developmental programs like Vision 2030, to diversify income sources and increase the contribution of non-oil sectors, reducing reliance on oil price fluctuations and enhancing the sustainability of the local currency. In the corporate sector, these policies provide a stable working environment that encourages major companies like SIGMIX to invest in modernizing factories and expanding production lines. Moreover, government incentives, such as reducing energy prices or providing financing facilities, help alleviate pressures on companies when facing market challenges or exchange rate fluctuations. This positive interaction between government policies and currency stability enhances the competitiveness of the Saudi economy and attracts new capital to the financial market, especially as the Kingdom opens up to foreign direct investments and develops financial infrastructure. Ultimately, currency stability is a direct result of the integration of effective government policies with sound financial management in national companies, positively reflecting on overall economic performance and enhancing the Kingdom's position in global markets.

Currency plays a fundamental role in stock valuation and financial indicators in the Saudi market, as the Saudi Riyal represents the standard unit through which stocks are priced and company performance is evaluated. When analyzing stocks, investors use key financial indicators such as the Price-to-Earnings (P/E) Ratio, Return on Equity (ROE), and operating margin—all denominated in the local currency. Currency stability contributes to the stability of these indicators and provides a clear picture of companies' financial performance, enhancing the reliability of investment decisions. For example, if the Saudi Riyal experiences sharp fluctuations against foreign currencies, the value of assets and liabilities in Dollars or Euros may change when converted to Riyals, affecting net profit and capital accounts. Furthermore, companies that rely on financing sources or revenues in foreign currencies may be exposed to exchange rate risks, which directly reflects in their financial reports. For SIGMIX, most revenues and costs are conducted in Saudi Riyals, reducing exposure to currency risks; however, any change in the exchange rate of the Riyal may affect import costs and distributed profits. Additionally, foreign investors wishing to invest in the Saudi market monitor currency stability to assess the risks of converting profits into their local currencies. On the other hand, currency also affects the calculation of market indicators such as the Tadawul All Share Index (TASI), which measures the overall performance of the Saudi financial market in Riyals. Currency stability enhances the credibility of these indicators and encourages foreign investment inflows, supporting the overall economic growth of the Kingdom. Thus, it is clear that currency is not only a unit of account but also an essential element in financial and investment evaluation processes in the Saudi market.

The Saudi corporate sector faces ongoing challenges and opportunities related to the stability of the local currency and international exchange rates. Among the most notable challenges are fluctuations in energy prices and imported raw materials, as any change in currency value can lead to significant increases or decreases in operational costs. For example, if the Dollar price rises against the Riyal, companies that rely on importing equipment or essential materials may face a sudden increase in costs, impacting profit margins and net income. Conversely, the stability of the Saudi Riyal presents significant opportunities for companies to engage in long-term financial planning and enter into supply or export contracts with extended timeframes without worrying about sharp exchange rate fluctuations. This stability encourages companies to expand into new projects or upgrade production lines, while also enhancing the confidence of local and foreign investors in the Saudi market. Furthermore, prudent government policies allow companies to hedge against currency risks through financial instruments such as futures contracts or natural hedging by diversifying income sources. In the cement sector, companies like SIGMIX exemplify how to leverage currency stability to improve operational efficiency and achieve sustainable profits. On the other hand, companies face challenges in export markets if the value of the Riyal changes against the currencies of importing countries, which may affect the competitiveness of Saudi products. Additionally, sudden changes in monetary policies or global financial crises may impose pressures on companies and require a swift response to adjust financial strategies. Ultimately, currency represents a pivotal factor in the success or challenges of Saudi companies, necessitating continuous monitoring and precise financial planning to ensure sustainability in a changing economic environment.

In recent years, the world has witnessed a surge in digital or cryptocurrency, which has transformed the traditional financial landscape and opened new horizons for companies and investors. Digital currencies like Bitcoin and Ethereum enable decentralized exchanges, as they are not subject to the oversight of central banks or governments, granting them flexibility and speed in cross-border transactions. However, this innovation faces significant challenges in both the Saudi and global markets, including regulatory acceptance, price volatility risks, and cybersecurity issues. In Saudi Arabia, the government adopts a cautious approach to dealing with digital currencies, focusing on the importance of financial stability and protecting the monetary system from risks associated with sharp fluctuations in cryptocurrencies. Nevertheless, some companies have begun to explore blockchain technology applications in supply chain management or smart contracts, enhancing operational efficiency and reducing costs. For companies like SIGMIX, digital currencies may open future prospects for settling international transactions or improving transparency in financial operations, especially with the evolution of regulatory frameworks and the adoption of secure digital solutions. However, the risks surrounding digital currencies remain high, including the potential for value loss, weak commercial acceptance, and legal challenges. On the other hand, digital currencies can represent an opportunity to enhance financial innovation and attract foreign investments in technological sectors. Ultimately, the shift towards digital currencies presents both a challenge and an opportunity, requiring Saudi companies to balance potential risks and gains while staying informed about regulatory and technological developments to ensure they benefit from this changing financial landscape.

The future of currency in Saudi Arabia is moving towards achieving a balance between monetary stability and financial development, aligning with the aspirations of Vision 2030 and enhancing the position of the Saudi economy on the global stage. The stability of the Saudi Riyal is the cornerstone of the Kingdom's monetary policy, as the government continues to peg the currency to the US Dollar and maintains large cash reserves to ensure intervention when necessary. This stability allows for long-term financial planning for companies, enhances confidence in the local financial market, and encourages foreign investment inflows. At the same time, the Kingdom seeks to develop financial infrastructure and adopt the latest innovations in financial technology, such as electronic payments and digital financial services, paving the way for a more efficient and transparent future. Furthermore, the government has begun exploring the possibilities of issuing a national digital currency in collaboration with the UAE Central Bank, aiming to enhance financial security and facilitate digital transactions at the Gulf level. For major companies like SIGMIX, this development represents an opportunity to modernize financial operations and adopt advanced technological solutions in cash management and transactions. On the other hand, the primary challenge remains to maintain a balance between embracing financial innovations and addressing risks associated with global fluctuations or cyberattacks. Ultimately, the Saudi Riyal is expected to continue playing a pivotal role in achieving economic stability and supporting comprehensive development, with a gradual evolution in payment methods and cash management in line with global standards for transparency and efficiency. This direction enhances the Kingdom's competitiveness in regional and international markets and opens new horizons for both companies and investors.

Analyzing the impact of currency changes on listed companies in the Saudi market is essential for understanding the dynamics of the local economy and the challenges faced by companies in a changing environment. SIGMIX serves as a clear example of this impact, as it primarily relies on local demand in Saudi Riyals, but some cost elements are subject to global exchange rate fluctuations. For instance, if the exchange rate of the Dollar rises against the Riyal, the cost of importing equipment or some raw materials may increase, reflecting on production costs and profit margins. In 2024, SIGMIX benefited from the stability of the Riyal in maintaining moderate import costs, supporting its ability to distribute cash dividends of 10 Riyals per share. Conversely, if global markets experience sharp fluctuations in exchange rates or if global energy prices rise in Dollars, the company may face challenges in controlling operational expenses. Additionally, companies that enter into export or supply contracts in foreign currencies are more exposed to currency risks, necessitating the implementation of financial hedging strategies such as futures contracts or diversifying income sources. In practical terms, the management of major companies focuses on monitoring financial markets and changes in central bank policies to adjust financial plans and avoid exposure to unforeseen risks. Furthermore, regular financial disclosures regarding the impact of currency changes are one of the transparency requirements in the Saudi financial market, providing investors with a clear picture of the risks and opportunities associated with each company. Thus, it is evident that understanding the impact of currency on listed companies is a fundamental element in financial and investment evaluation, enhancing companies' ability to sustain and grow in a renewed economic environment.

Saudi companies, especially those listed in the financial market, face ongoing challenges in managing currency risks arising from global exchange rate fluctuations and their impact on costs and revenues. To address these risks, companies rely on a range of financial and managerial strategies aimed at minimizing the impact of currency value changes on final financial results. One of these strategies is financial hedging, where companies use financial instruments such as futures contracts and options to lock in specific exchange rates for import or export transactions, reducing the risks of unexpected costs. Some companies also diversify their income sources and clients across multiple markets in local and foreign currencies, limiting reliance on a single market or currency. In other cases, companies price their products or services in Dollars or Euros when dealing with international markets, transferring some of the currency risks to customers or suppliers. For companies like SIGMIX, which heavily rely on the local market in Saudi Riyals, risk management focuses on monitoring global markets and tracking changes in energy prices or raw materials that may be influenced by the Dollar or Euro exchange rates. Additionally, companies enhance financial awareness programs among management teams to ensure informed decisions regarding the timing of purchases or expansion in capital expenditures. Ultimately, currency risk management is an integral part of the financial strategy of Saudi companies, requiring a mix of financial solutions, administrative processes, and smart future planning to ensure financial sustainability in a volatile economic environment.