32. Financial instruments

32.1 Fair value measurement of financial instruments

a) Recognised fair value measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Company has access at that date. The fair value of a liability reflects its non-performance risk.

When measuring the fair value of an asset or liability, the Company uses observable market data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: inputs other than quoted prices included level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

As at December 31, 2025 and 2024, all of the Company’s financial assets and financial liabilities are currently classified and measured at amortised cost. Further, the carrying value of all the financial assets and liabilities classified as amortised cost approximates to the fair value on each reporting date.

32.2 Risk management framework

The Company’s top management has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Company’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company’s financial performance. Risk management is carried out by the Board of Directors.

The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Company, through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Company management monitors compliance with the Company’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Company’s audit committee is assisted in its oversight role by internal audit. Internal audit undertakes both regular and ad-hoc reviews of risk management controls and procedures, the results of which are reported to the management.

The Company has exposure to the following risks arising from financial instruments:

• Credit risk
• Liquidity risk
• Market risk (currency risk, fair value and cash flow interest risk and price risk)

b) Credit risk

Credit risk arises from cash and cash equivalents, credit exposures to customers, including outstanding receivables.

Risk management

The stated rating is as per the global bank ratings by Moody’s Investors Service.

The credit rating of banks in which the Company holds cash and cash equivalents are as follows:

The short-term Murabaha deposits are held with banks having Aa3 credit rating (2024: A1 credit rating) and yields financial income at prevailing market rates. The carrying value at each reporting date is estimated to be the same as their fair value.

For trade receivables, management assesses the credit quality of the customers, considering their financial position, past experience and other factors. The compliance with credit limits by customers is regularly monitored by the management.

For banks, only independently credit rated parties having sound ratings are accepted. For trade receivables, internal risk control department assesses the credit quality of the customers, taking into account their financial position, past experience and other factors. Individual risk limits are set in accordance with limits set by the management. The compliance with credit limits by customers is regularly monitored by line management.

A significant increase in credit risk is presumed if a debtor is more than 30 days past due in making a contractual payment. A default on a trade receivable occurs when the counterparty fails to make contractual payments within 90 days of when they fall due. The Company categorizes a receivable for write-off when a debtor fails to make contractual payments greater than 360 days past due. Where receivables have been written-off, the Company continues to engage in enforcement activity to attempt to recover the receivable due. Where recoveries are made, these are recognised in the statement of profit or loss and other comprehensive income.

Financial assets are written off when there is no reasonable expectation of recovery, such as a debtor failing to engage in a repayment plan with the Company. The Company writes-off financial assets, in whole or in part, when it has exhausted all practical recovery efforts and has concluded there is no reasonable expectation of recovery. Where recoveries are made, these are recognised in the statement of profit or loss and other comprehensive income.

Impairment of financial assets

The Company’s maximum exposure to credit risk at the reporting date is as follows:

Other receivables are considered to have low credit risk; therefore, 12 months expected loss model was used for impairment assessment. Based on management’s impairment assessment, there is no provision required in respect of these balances for all the periods presented.

For trade receivables, the Company applies the simplified approach to provide for expected credit losses prescribed by IFRS 9, which permits the use of the lifetime expected credit loss provision for all trade receivables based on a provision matrix. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due.

The provision matrix takes into account historical credit loss experience and is adjusted for average historical recovery rates. The provision matrix was developed considering probability of default based on historical collection trends of the Company’s customers and credit rating of the Company’s related parties assigned by reputed credit rating agencies and loss given default. The loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables.

The historical loss rates are also considered to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. The Company has identified inflation rate, oil prices and GDP growth rate of the countries in which it sells its goods to be the most relevant macro-economic factors of forward-looking information that would impact the credit risk of the customers and accordingly adjusts the historical loss rates based on expected changes in these factors.

Impairment losses on financial assets recognised in the statement of profit or loss and other comprehensive income are as follows:

The following table provides information about the exposure to credit risk and ECLs for trade receivables from external customers:

Trade receivables relate to sales made during the year to corporate customers. As at December 31, 2025, trade receivables balance from related parties’ is Saudi Riyals 187.13 million (December 31, 2024: Saudi Riyals 576.3 million). Out of this amount Saudi Riyals 163.31 million was ‘not due’, Saudi Riyals 10.54 million was due ‘1 to 90 days’ and Saudi Riyals 13.28 million was due ‘more than 365 days’ (December 31, 2024: Saudi Riyals 565.03 million was ‘not due’, Saudi Riyals 2.07 million was due ‘91 to 180 days’, Saudi Riyals 8.12 million was due ‘181 to 365 days’, and Saudi Riyals 1.06 million was due ‘more than 365 days’) having impairment loss of Saudi Riyals 5.33 million (December 31, 2024: Saudi Riyals 2.49 million). These pertain to corporate related parties that have no history of default and accordingly the probability of default is minimal. For related parties’ balances, the Company applies the simplified approach to provide for expected credit losses, which permits the use of the lifetime expected credit loss provision based on a provision matrix. Further, related parties’ balances have low credit risk and majority balances were not yet due at each reporting date.

Trade receivables are non-derivatives financial assets carried at amortised cost and are generally on terms of 30 to 60 days. The carrying value may be affected by changes in the credit risk of the counterparties. It is not the practice of the Company to obtain collateral over third party trade receivables and these are, therefore, unsecured. The majority of the Company’s trade receivables are concentrated in the Kingdom of Saudi Arabia. As at December 31, 2025, the five largest customers accounted for 62% (December 31, 2024: 65%) of the outstanding trade receivables.

c) Liquidity risk

Liquidity risk is the risk that an enterprise will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from an inability to sell a financial asset quickly at an amount close to its fair value. Liquidity risk is managed by monitoring on a regular basis that sufficient funds are available through committed credit facilities to meet any future commitments. For instance, concentrations of liquidity risk may arise from the repayment terms of financial liabilities or reliance on a particular market in which to realise liquid assets. Contractual undiscounted cashflows are:

Liquidity risk is managed by monitoring on a regular basis that sufficient funds and banking and other credit facilities are available to meet the Company’s future commitments.

d) Market risk

Market risk is the risk that changes in market prices - such as foreign exchange rates and interest rates will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters while optimizing the returns. Market risk is the risk that the fair value or the future cash flows of a financial instrument may fluctuate as a result of changes in market profit rates or the market prices of securities due to change in credit rating of the issuer or the instrument, change in market sentiments, speculative activities, supply and demand of securities and liquidity in the market. Market risk comprises of three types of risk: currency risk, interest rate risk and other price risk.

i) Currency risk Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. Currency risk arises when future commercial transactions and recognised assets and liabilities are denominated in currency that is not the Company’s functional currency. The Company’s transactions are principally in Saudi Riyals, United Arab Emirates Dirhams, Euros and United States Dollars. The management believes that there is no currency risk arising from the transactions in currencies to which the Saudi Riyals is pegged.

The Company’s exposure to currency risk arising from currencies to which the Saudi Riyals is not pegged is not material to these financial statements.

ii) Interest rate risk Interest rate risks are the exposures to various risks associated with the effect of fluctuations in the prevailing interest rates on the Company’s financial position and cash flows. The Company manages the interest rate risk by regularly monitoring the interest rate profiles of its interest-bearing financial instruments. The Company’s interest-bearing liabilities, which are mainly bank borrowings, are at floating rates of interest, which are subject to re-pricing. Management monitors the changes in interest rates and believes that the fair value risks to the Company are not significant. The Company have short-term deposits and Murabaha term deposits, interest bearing financial assets at the end of reporting period.

The interest rate profile of the Company’s interest-bearing financial instruments as reported to the management of the Company is as follows:

The Company’s main interest rate risk arises from borrowings with variable rates, which expose the company to cash flow interest rate risk. During 2025 and 2024, the Company’s borrowings at variable rate were mainly denominated in Saudi Riyals and USD.

At December 31, 2025, if interest rates had been 100 bps higher/lower with all other variables held constant, future interest on outstanding loans will increase/decrease by Saudi Riyals 10.4 million (December 31, 2024: Saudi Riyals 16.17 million).

iii) Price risk Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from special commission rate risk or currency risk) whether those changes are caused by factors specific to the individual financial instruments or it’s issuer, or factors affecting all similar financial instruments traded in the market. The Company does not have any financial instruments which are subject to other price risk.

e) Capital management

The primary objective of the Company’s capital management is to ensure that it maintains a proper capital ratio in order to support its business and maximize shareholders’ value. The capital is managed by the board of directors. The capital structure includes all component of shareholders’ equity. The Company manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.

The Company monitors capital on the basis of the gearing ratio. This ratio is calculated based on the net cash / debt divided by total capital.

f) Net cash / debt reconciliation