Earnings Report /
Saudi Arabia

Yanbu Cement Co: Higher exports support earnings

  • Local cement sales stood at 1.30mn tons (-4.5% yoy, +4.9% qoq)

  • Revenue decreased by 17.4% yoy (+26.4% qoq) to SAR242mn

  • Operating expenses in absolute terms increased 12.6% yoy to SAR14.2mn

Iyad Khalid Ghulam
Iyad Khalid Ghulam

Vice President, Senior Equity Research Analyst

SNB Capital
25 April 2022
Published by

Yanbu Cement reported a net income of SAR38.9mn in Q1 22, declining 47.0% yoy (+284%). However, this is higher than the SNB Capital and consensus estimates of SAR30.7mn and SAR34.6mn, respectively. We believe the positive variance in earnings was mainly due to higher than expected volumes which stood at 1.70mn tons vs our estimates of 1.57mn tons, as selling prices (SAR142/ton vs SAR141/ton) was in-line with our estimates.Total sales quantities during Q1 22 stood at 1.70mn tons (-10.5% yoy, +28.4% qoq), and came higher than our estimates of 1.57mn tons. This compares to the total industry decline of 10.3% yoy (+5.6% qoq).

  • Local cement sales stood at 1.30mn tons (-4.5% yoy, +4.9% qoq) and is marginally better than the local industry decline of 7.2% yoy and in-line with our estimate of 1.27mn tons. The variance mainly came as result of higher than expected clinker exports, which stood at 399,000 tons (-21.1% yoy, +375% qoq), compared to our estimates of 298,000 tons.

  • Revenue decreased by 17.4% yoy (+26.4% qoq) to SAR242mn, but came higher than our estimates of SAR221mn. Average selling prices stood at SAR142/ton (-7.7% yoy, -1.5% qoq) in-line with our estimate of SAR141/ton.

  • Despite gross margins contracting by 525bps to 22.5% in Q1 22, they came higher than our estimates and Q4 21 levels of 19.3% and 20.2%, respectively. We believe the variance in gross margins was due to lower than expected production costs as cost/ton stood at SAR110/ton in Q1 22 vs SAR111/ton in Q1 21 and our estimates of SAR114/ton.

  • Operating expenses in absolute terms increased 12.6% yoy to SAR14.2mn vs our estimates of SAR11.5mn and Q4 21 levels of SAR12.1mn while opex to sales stood at 5.9% in Q1 22 vs 4.3% in Q1 21 and our estimates of 5.2%.

  • Net other expenses stood at SAR1.3mn vs our estimates an expense of SAR0.5mn and a net other income of SAR4.8mn in Q1 21.

 Outlook

Based on our last update, we are Neutral on Yanbu Cement with a PT of SAR37.7. Although continued pressure on selling prices represents a key concern, we expect the company to benefit from its close proximity to Giga projects in the long-run. The stock currently trades at a 2022f PE of 27.3x compared to the peer group average PE of 22.4x.