Strategy Note /
Saudi Arabia

Meeting feedback summary – Riyadh Cement

  • The company tries to maintain its prices by being selective and avoiding dumping its product in the market

  • The company expects to invest SAR200mn, to improve its energy efficiency

  • The company expects to maintain a semiannual dividend of SAR 0.75/share

Iyad Khalid Ghulam
Iyad Khalid Ghulam

Head of Equity Research

SNB Capital
1 June 2022
Published by

Meeting feedback summary – Riyadh Cement

 Sector View

  • Pricing: In Q1 21, the sector witnessed a major pricing pressure. However, for Q2 22, prices started to improve as average ex-factory prices started to recover to cSAR160/ton. The company expects prices to rationalize during H2 22.

  • Demand: For 2022f, demand slowed down, however the long-term demand prospects is positive driven by MoH and Giga projects.

  • White Cement: White cement demand stands at 700-800kpta. There are two major players that produces white cement in Saudi, RCC and Northern Cement.

  • Energy Efficiency: The government is pushing the sector to improve its carbon footprint and reduce energy cost. The sector as a whole is increased its capex spending to reduce energy costs.

Company Outlook

  • The company tries to maintain its prices by being selective and avoiding dumping its product in the market. The company highlighted that it prefers to reduce sales levels if prices are low.

  • Demand: Demand remained weak during Q2 22 due to Ramadan. The company catered to all mega projects in the central region.

  • White Cement: The company has a capacity of 1.0mpta of white cement, where the plant has maintained a healthy utilization of above 80%. It faces competition from Northern cement and imports, however in the central region they are able to maintain its position due to transportation cost advantage.

  • Energy efficiency: The company expects to invest SAR200mn, to improve its energy efficiency, SAR150mn alone are allocated towards the waste heat recovery plant. The company is targeting energy consumption of 12-15kWat per ton of cement.

  • Capacity: The company has clinker capacity of 3.3-3.4mtpa, which translates into 3.6mtpa of cement capacity. The company does not plan to increase its capacity.

  • Receivables: The company highlighted that its receivables situation has improved, however receivable collection is quite challenging.

  • Related party Sales: The company sees zero risk to it sales to a related party in term of receivables and future sales.

  • Dividend: The company expects to maintain a semiannual dividend of SAR 0.75/share.

  • Main market: The company expects to move to the main market (TASI) in the coming period.