Currency Change: A Comprehensive Explanation of Procedures and Effects of

The term "currency change" or activity change in companies listed on the Saudi financial market refers to a fundamental modification of the company's field of work or the addition of new activities that differ from the core activity on which the company was established. In the Saudi organizational structure, there is no single official designation for this concept within the Companies Law or the regulations of the Capital Market Authority; however, it often falls under the framework of amending the company's articles of association or expanding the authorized activities in the commercial register. The importance of this concept lies in enabling companies to respond to economic transformations or exploit new opportunities emerging in the market.

Changing activity is not merely a formal procedure or administrative adjustment; it is a strategic process that requires in-depth study of the market environment, economic feasibility analysis, and the company's ability to manage the risks associated with entering new activities. For example, if a cement company faces an oversupply and weak demand for its core product, it may resort to adding new production lines such as ready-mix concrete or advanced building materials, aiming to diversify revenue sources and reduce reliance on a single product.

The regulatory process in Saudi Arabia typically begins with the approval of the board of directors, which is required to prepare a feasibility study and strategic vision. Following that, approval must be obtained from the extraordinary general assembly of shareholders, where the system usually requires a majority vote (often 75% for attendance and 50% of votes). After ratification, the articles of association are updated, and amendments are submitted to the Ministry of Commerce and the Capital Market Authority. Regulations obligate companies to disclose details of the change to the market and investors, including the expected financial impact and any new risks or opportunities that may arise from this transformation.

Currency change is considered a sensitive decision, as it requires balancing ambition for growth with operational and regulatory risks. Regulatory authorities closely monitor these processes to ensure the protection of shareholder rights and prevent any conflicts of interest or ill-considered decisions that could negatively affect the financial sustainability of the company.

Changing activity or "currency change" is not a random decision; it typically arises as a response to strategic considerations related to the company's future and sustainability in a changing environment. Among the most prominent motivations is the need to address challenges associated with traditional sectors, such as fluctuations in demand, increased competition, or even market saturation. For example, Saudi cement companies have suffered at times from oversupply and declining prices due to the entry of new competitors or weak seasonal demand, prompting their management to seek solutions to enhance revenues.

One of the most significant motivations for change is the desire to diversify income sources. When a company relies on a single product or service, it becomes vulnerable to market fluctuations, as evidenced by past experiences in sectors like oil or mining. Entering new fields such as ready-mix concrete or specialized building materials provides companies with greater flexibility to respond to economic transformations and capitalize on the massive infrastructure projects launched by the government, as seen with the NEOM and Red Sea projects.

There is also a motivation related to keeping pace with global and local trends, such as the shift towards environmentally friendly products or sustainable solutions. Companies like Hail Cement have recently begun exploring production solutions based on solar energy or offering low-carbon footprint products, in response to the requirements of Vision 2030. Furthermore, there may be regulatory or governmental incentives, as some policies encourage industrial sector companies to enter high-value-added fields or support exports to regional markets.

On the other hand, the need to maintain competitiveness in a volatile sector is highlighted, as the entry of competing companies into new fields drives others to keep pace and not remain confined to traditional activities. Sometimes, change is driven by acquisition opportunities or strategic partnerships, where mergers or alliances with other companies allow for expansion into unprecedented activities.

All these factors make currency change a necessary step, not just an additional option, to ensure continued growth and enhance the ability of Saudi companies to face future challenges.

The process of currency change in the Saudi financial market is subject to a series of strict regulatory procedures aimed at protecting shareholder rights and ensuring the integrity of the investment environment. The process typically begins within the company, where the board of directors must prepare a comprehensive feasibility study and provide clear justifications for the feasibility of the transformation or the addition of the new activity. The study must include a market analysis, an estimate of returns and risks, and a detailed implementation plan.

After the board of directors' approval, the next crucial step is the extraordinary general assembly of shareholders, where the proposed change is presented for voting in accordance with the Saudi Companies Law. The system usually requires the attendance of at least 75% of the capital and the approval of 50% of the present votes or more, ensuring broad participation from investors in the decision-making process. At this stage, the company must disclose all details related to the change, including the expected financial impact and any amendments to the articles of association.

Following the shareholders' ratification, the company is required to update its articles of association (foundational system) and submit the amendments to the Ministry of Commerce. The Capital Market Authority supervises the full disclosure of the change through official announcements on "Tadawul", where the company must clarify the details of the amendment, its justifications, timing of implementation, and any potential impact on the company's financial or operational performance. This ensures complete transparency and allows investors to understand the implications of the step on the company's future.

Finally, the company's commercial register is updated to reflect the new or modified activities, with regulatory authorities obligated to monitor the company's compliance with the authorized activities. In case of any breach of procedures or violation of regulations, the Capital Market Authority has the authority to take corrective actions or impose penalties. The importance of these regulatory procedures lies in protecting the market from arbitrary or ill-considered decisions and confirming that currency change resulted from strategic planning that serves the interests of all parties.

Economic feasibility studies and risk analysis are fundamental pillars for the success of the currency change process in any company listed on the Saudi financial market. Local regulations require that any decision to change activity be accompanied by a detailed analysis of economic feasibility, which includes assessing the expected demand, investment costs, anticipated returns, and risks associated with the new activity. This study aims to minimize the chances of failure and provide a clear picture to shareholders about the potential for transformation.

For example, when a large cement company like Hail Cement wishes to add ready-mix concrete activity, management must ensure that there is sufficient demand in the local market, analyze supply chains, and estimate the costs of building new production lines. The competition in the new sector and the company's ability to provide added value compared to competitors should also be reviewed. The study should also include alternative scenarios in case the fundamental assumptions do not materialize, such as delays in product launch or changes in global raw material prices.

Risk management encompasses several dimensions, including operational, regulatory, and financial risks. Operational risks may relate to challenges in starting production or a lack of specialized competencies in the new field. Financial risks associated with injecting large capital investments and their impact on the company's cash flows should also be studied. On the other hand, there are regulatory risks related to non-compliance with regulations or delays in obtaining official approvals.

Saudi regulations require that the results of the feasibility study and the risk matrix be presented to the board of directors and shareholders before voting on the decision, which increases transparency and enhances trust in the company's management. The Capital Market Authority also obliges companies to disclose any material developments in this context, allowing investors to assess the realism and feasibility of the change step. Ultimately, the success of currency change depends on the accuracy of the prepared studies, the realism of the forecasts, and the company's flexibility in dealing with emerging challenges after implementation.

Financial performance is one of the most critical indicators monitored by markets and investors when implementing currency change in listed companies, as the success or failure of the transformation directly reflects on revenues, profitability, and cash flows. Companies typically aim to achieve revenue growth or improve profit margins through activity change, especially if the new activity has higher added value or is less exposed to market fluctuations.

Looking at the example of Hail Cement, financial data for the years 2024-2025 showed relative stability and growth following the company's expansion into the ready-mix concrete sector. In the first quarter of 2024, the company's net profit (projected) showed a slight increase from the previous year, supported by increased sales in the new activity. Revenues also recorded an approximate growth of 5% on average with improved construction season, while the price of local cement increased in some regions, enhancing the overall profit margin.

In terms of market value indicators, Hail Cement's share (3001) witnessed a gradual rise from the range of 10-13 Saudi Riyals per share in 2024 to nearly 15 Riyals in the second quarter of 2025, reflecting investor confidence in the impact of production expansion and the company's entry into new markets. The price-to-earnings (P/E) ratio stood at around 8-10 times, a competitive rate within the Saudi cement sector, while the company continued to distribute dividends amounting to 50% of net profit.

However, it should be noted that the financial impact of currency change may not always be positive, especially if the investment costs of the new activity rise or the company faces implementation difficulties. Therefore, monitoring financial performance after the change is one of the essential indicators for assessing the success of the step and guiding management decisions regarding future expansion or modification of activity.

The Saudi cement and construction materials sector is witnessing intense competition among a group of major companies, which forces each company to continuously develop its strategies to maintain its market share and enhance its growth capacity. The importance of currency change in this sector emerges as a key tool to address challenges of oversupply, price fluctuations, and cost pressures.

Over the past decade, the sector has expanded significantly, driven by massive infrastructure projects, with total cement production in Saudi Arabia reaching about 7 million tons in the first quarter of 2024. However, the entry of products from neighboring countries and the increase in the number of local companies have led to fierce price competition, prompting some companies to seek side activities such as ready-mix concrete or specialized building materials.

Among the main competitors of Hail Cement (3001) are Saudi Cement Company (3000), Najran Cement Company (3004), and Arab Cement Company (2250), each covering specific geographical areas and focusing on particular production lines or markets. In recent years, some of these companies have officially changed their authorized activities to include ready-mix concrete production or entering environmental projects that support sustainable building requirements. For instance, one company announced in 2024 the commencement of manufacturing specialized concrete products after amending its articles of association, enhancing its ability to meet demand in major housing projects.

As for Hail, it has focused on strengthening its presence in the northern Saudi market, with plans to expand into areas like Al-Jouf and Al-Qurayyat. Its recent entry into the ready-mix concrete activity is a clear example of currency change as a strategic tool to face competition, especially since companies like Southern Cement and Qassim Cement have already begun adding new activities to improve profit margins. This shows that the entire sector is moving towards diversification, driven by the need to keep pace with mega projects and changing market requirements within the framework of Vision 2030.

Although currency change is considered an important strategic step for companies listed on the Saudi financial market, it carries a set of risks and challenges that management and shareholders must be well aware of before making the decision. Among the most prominent of these risks is the delay in launching the new activity due to difficulties in obtaining the necessary licenses or issues in preparing production lines.

For example, a cement company wishing to produce ready-mix concrete may face obstacles related to equipment supply or qualifying specialized personnel, leading to delays in starting operations and achieving expected revenues. Additionally, there are risks associated with fluctuations in raw material prices, such as coal or electricity, which constitute a significant part of production costs in the cement sector. Any unexpected rise in these costs may negatively impact the profitability of the new activity.

On the other hand, the challenge of weak knowledge of the new market is highlighted, especially if the activity is far from the company's or its management's core expertise. In some cases, entering uncharted areas may lead to financial losses or a decline in investor confidence. Regulatory risks remain present, as non-compliance with the procedures of the Capital Market Authority or the Ministry of Commerce may expose the company to penalties or even the cancellation of required licenses.

General economic fluctuations represent an additional challenge, as demand for new products may change unexpectedly due to economic events or shifts in government policies. In this environment, transparent communication with shareholders and clarifying risk management plans are essential to maintain trust and ensure continued growth after the change. Thus, it becomes clear that success in currency change requires careful risk management, with flexibility to adapt to emerging conditions and continuous review of achieved results.

Hail Cement Company (3001) serves as a real example of how to implement currency change gradually and successfully in the Saudi financial market. In recent years, the company has begun to implement an expansion strategy aimed at diversifying income sources by adding ready-mix concrete activity alongside traditional cement production. This transformation came in response to a thorough analysis of market conditions, as feasibility studies showed rising demand in government and private projects, particularly in the northern Saudi regions that represent Hail's primary market.

In mid-2024, the company launched a project to expand its production line by 25%, bringing the total annual production capacity to approximately 1.5 million additional tons. This was accompanied by its announcement of environmental initiatives such as establishing a solar power station to cover part of its electricity needs, aligning with the Kingdom's direction towards green industry. The company also signed distribution agreements with major contracting firms to enhance its presence in housing and infrastructure projects.

Financially, the currency change positively reflected on the company's results, as financial reports for the year 2024-2025 showed a 5% average revenue growth and a decrease in inventory levels, indicating improved actual demand. The stock also maintained relative stability in the market, with a dividend distribution of 50% of net profit. Hail's experience confirms that success in currency change fundamentally relies on clarity of vision, quality of execution, and alignment with market and regulatory trends.

Hail Cement's experience also highlights the importance of continuous management updates, as the company appointed a new CFO at the beginning of 2025 to support financial and production expansion. Overall, the company serves as a model for how to manage strategic change and turn market challenges into real opportunities for sustainable growth.

Regulatory authorities in the Saudi financial market, led by the Capital Market Authority and the Ministry of Commerce, impose a set of obligations on companies wishing to implement currency change. These obligations begin with clear and accurate disclosure of all stages of the change, through obtaining the necessary approvals, and up to updating the company's official data in government records.

When deciding to change activity, the Capital Market Authority requires companies to immediately announce their intention to change through the "Tadawul" platform, clarifying the justifications for the decision, the expected financial impact, and the legal and regulatory procedures that will be followed. The company must also provide a clear timeline for implementation, updating investors on any significant developments during the transformation phases. Transparent disclosure aims to protect shareholder rights and prevent any trading based on information not available to the public.

On the other hand, the company must update its articles of association after the extraordinary general assembly's approval and register the new activities in the commercial register with the Ministry of Commerce. This is accompanied by submitting all supporting documents to the Capital Market Authority, which reviews the company's compliance with regulations and laws. In case of any violations or deficiencies in disclosures, the authority reserves the right to take corrective measures or impose fines, which in some cases may include suspending the stock's trading or revoking licenses.

These regulatory procedures play a pivotal role in ensuring market integrity and protecting investors from ill-considered decisions or those that may negatively impact the company's stability. Regular disclosures also enable investors to realistically assess the impact of currency change and make their investment decisions based on accurate and transparent information.

The step of currency change in Saudi companies comes within a broader context outlined by Vision 2030, which focuses on diversifying the economy and reducing reliance on traditional resources. The vision encourages industrial companies, especially in sectors like cement and building materials, to develop new products, adopt environmentally friendly solutions, and enter new regional and international markets.

One of the most prominent opportunities provided by Vision 2030 is the connection to mega projects such as NEOM and the Red Sea, where these projects require advanced construction products and high-value-added services. Companies that proactively change their activities to meet these requirements position themselves competitively to secure government contracts or strategic partnerships. Additionally, the shift towards producing environmentally friendly building materials or renewable energy solutions gives companies a competitive edge amid the increasing demand for sustainable products.

On the challenge side, implementing currency change in this context requires a high capacity for innovation and substantial investments in research and development. Competing with international companies that may have more experience or advanced technologies forces local companies to enhance their technical and managerial capabilities. Furthermore, the need for full compliance with environmental and regulatory standards remains a critical factor for the success of the transformation.

On the other hand, the Saudi government supports these trends through financing programs and investment facilitation, encouraging companies to take bold steps in changing their activities. However, success requires a delicate balance between the ambition for innovation and the ability to manage risks and achieve sustainable financial returns. Thus, currency change emerges as a key tool for achieving the aspirations of Vision 2030, with a realistic assessment of the opportunities and challenges of each sector.

Strategic alliances and partnerships play a crucial role in the success of the currency change process, especially in industrial sectors that require substantial resources and specialized expertise. Companies often resort to entering partnerships with local or international entities when changing their activity, aiming to reduce risks, accelerate the implementation process, and benefit from technological expertise.

In the cement sector, for example, some Saudi companies have entered into agreements with major contracting firms to distribute their new products such as ready-mix concrete or advanced building materials. This allows companies like Hail Cement to quickly access major government projects and increase their sales volume without the need to build an independent distribution network from scratch. Partnerships with technology companies also provide opportunities to acquire advanced production technologies or environmentally friendly solutions, supporting companies' commitment to the requirements of Vision 2030.

On the other hand, alliances enable the sharing of investment costs and risks associated with entering new activities, especially when the need arises to establish modern factories or production lines. In some cases, partnerships with international companies may open doors for exporting to foreign markets or accessing favorable financing through joint investment programs.

However, successful partnerships require careful consideration in selecting the right partner and establishing clear mechanisms for profit distribution and risk management. Alliances should align with the company's strategic direction and long-term goals and should not lead to conflicts of interest or loss of control over the new activity. Ultimately, alliances and partnerships are key to success in currency change, provided they are managed wisely, transparently, and with meticulous strategic planning.

Evaluating the success of the currency change step in companies listed on the Saudi financial market depends on a set of quantitative and qualitative criteria and indicators. The first and most important of these indicators is the revenue growth resulting from the new activity compared to traditional activities. For example, if a company adds ready-mix concrete to its activity and the contribution of this activity to total sales increases during the first two years, this is considered a positive indicator of the success of the change.

Other indicators include the operating profit margin, which shows the extent to which the new activity can enhance the company's profitability or at least maintain stable margins amid market challenges. Investors also monitor market share growth, which reflects the company's ability to capture a larger market segment or enter new geographical markets thanks to the new activity.

Financially, the return on investment (ROI) rate is an important tool for assessing the feasibility of the change, as it compares the revenues generated from the new assets or projects with the costs incurred. In the case of Hail Cement, for example, the sales ratio from ready-mix concrete or the extent of improvement in net profit after production expansion will be viewed as a measure of success.

Success criteria are not limited to numbers alone; they also include shareholder satisfaction and trust in management after the change, as well as the company's commitment to disclosure and transparency during the implementation process. Additionally, compliance with regulatory standards and avoiding any violations or penalties is a fundamental factor in ensuring the sustainability of success. Ultimately, the success of currency change is the result of a combination of financial, operational, and regulatory indicators that must be continuously monitored and periodically evaluated.

Dividend distributions are a fundamental issue that occupies investors' minds when implementing currency change in listed companies, as the distribution pattern may be affected by the investment costs of the new activity or changes in cash flows. In many cases, companies maintain their distribution policy if the new activity generates additional profits or does not negatively impact the financial position.

For instance, Hail Cement maintained cash dividends of approximately 50% of net profit at the end of the fiscal year 2024, despite investing in expanding production lines and entering the ready-mix concrete activity. This is due to increased revenues and improved net profit, allowing the company to balance growth with meeting shareholder expectations.

However, some companies may temporarily reduce the distribution ratio if the new activity requires substantial capital investments or if they face cash flow challenges during the transition period. This measure is often temporary, and the company returns to a stable distribution pattern once the new activity stabilizes and begins to achieve the desired returns.

It is important for companies to adhere to transparency when making decisions regarding distributions during the change period, clearly explaining the justifications for any temporary adjustments to shareholders. Distribution decisions should also be balanced with the need to support future growth without jeopardizing financial stability. Ultimately, the continuity or adjustment of distributions after currency change primarily depends on the results of the new activity and the company's management of cash flows and investments.

Transparent disclosure and continuous communication with shareholders play a pivotal role in the success of the currency change process, as this approach ensures building trust and supporting management decisions during the change phases. In the Saudi financial market, regulations require listed companies to fully disclose their intentions to change activity, the justifications for the decision, and the expected impact on financial and operational performance.

The disclosure process typically begins with an official announcement via the Tadawul platform as soon as the board of directors makes the decision, providing detailed information about the new activity, economic feasibility, and implementation risks. When calling the extraordinary general assembly for voting, shareholders are given the opportunity to review the submitted studies and ask questions to management, ensuring genuine participation in the decision-making process.

After implementing the change, the company is committed to providing periodic reports on the progress of the new activity, actual performance indicators, and any challenges or opportunities that arise during implementation. This allows investors to monitor performance and adjust their expectations based on real results. Management should also respond promptly to any inquiries from shareholders or regulatory authorities, clarifying any significant changes in execution plans or financial forecasts.

Continuous disclosure not only protects investors' rights but also limits rumors and speculation not based on accurate information. It also enhances the company's reputation in the market and increases its valuation among investors and financial institutions. Overall, transparent communication is a fundamental pillar for the success of currency change and ensuring sustainable growth after implementation.