Yanbu Cement reported a net income of SAR36.4mn, declining 55.9% yoy (-13.0% qoq). This is higher than the SNB Capital estimates of SAR26.4mn but in-line with the consensus estimates of SAR35.6mn. We believe the variance was mainly due to 1) higher than expected average selling prices of SAR150/ton (versus our estimates at SAR137/ton) and 2) lower than expected clinker exports of 0.37mn tons (versus our estimates of 0.48mn tons).
Revenues decreased 13.6% yoy to SAR208mn (-14.4% qoq), in-line with our estimates. Average selling prices stood at SAR150/ton (-19.3% yoy, +5.8% qoq) and was higher than our estimates of SAR137/ton. We mainly attribute the variance in prices to higher portion of local cement sales vs exports (which are typically sold at lower prices). Local sales prices stood at SAR177/ton, which represents the lowest level since Q3 18.
Total sales quantity increased 7.1% yoy to 1.38mn tons in Q3 21, and was lower than our estimates of 1.52mn tons. Local cement sales decreased 5.6% yoy and qoq to 1.02mn tons, outperforming the local industry’s decline of 11.6% yoy (-2.7% qoq), but were in-line with our estimates of 1.04mn tons.
Exports stood at 365,000 tons, significantly lower than our estimates of 484,000 and Q1 21 and Q2 21 levels of 538,000 and 630,000 tons, respectively. As exports prices are lower than local prices, we believe lower exports contributed positively to the overall selling prices. We note that exports consisted of only clinker in Q3 21, in-line with the previous two quarters.
Gross margins came in at 24.3%, lower than 37.3% in Q3 20 and compared to our estimates of 18.1%. We believe the variance from our estimates is due to lower production cost driven by lower than expected sales volumes. Cost/ton stood at SAR114/ton in Q3 21 compared to SAR117/ton in Q3 20.
Opex increased 104% yoy to SAR13.1mn, higher than our estimates of SAR10.0mn. Opex-to-sales stood at 6.3%, compared to 2.7% in Q2 21 and our estimates of 4.8%.
Based on our latest update, we are Neutral on Yanbu Cement with a PT of SAR47.3. Though pressure on cement prices represents a key concern for Yanbu and the cement sector as a whole, we expect the company to benefit from demand pick-up driven by its close proximity to the Western region’s construction projects in the medium to long term. The stock trades at 2021f PE of 19.7x, compared to the sector average of 18.7x.