Earnings Report /
Saudi Arabia

Yamama Cement: Q1 20 review – Highest earnings since Q1 16

  • Yamama Cement reported the highest earnings since Q1 16 with a net income of SAR124mn (+75.5% yoy)

  • Total sales quantity of Yamama Cement increased 37.8% yoy to 1.42mn tons in Q1 20, higher than our estimates

  • We are Neutral on Yamama Cement with a PT of SAR28.8

Iyad Khalid Ghulam
Iyad Khalid Ghulam

Head of Equity Research

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SNB Capital
22 April 2020
Published bySNB Capital

Yamama Cement reported a strong set of Q1 20 results with a net income of SAR124mn, increasing 75.5% yoy and 59.3% qoq. This is the highest earnings since Q1 16 and compares with the NCBC and consensus estimates of SAR84mn and SAR92mn, respectively. We believe the variance was mainly due to higher-than-expected selling quantities and lower-than-expected costs.

In Q1 20, Yamama Cement reported the highest earnings since Q1 16 with a net income of SAR124mn (+75.5% yoy). This is significantly higher than our estimates of SAR84mn. We believe the variance is attributed to 1) higher than expected selling quantities of 1.42mn tons (+37.8% yoy) vs our estimates of 1.29mn tons and 2) lower than expected production cost of SAR101/ton in Q1 20 vs our estimates of SAR123/ton and 2019 average of SAR122/ton. Selling prices stood at SAR204/ton, broadly flat yoy and in-line with our estimates of SAR206/ton. 

Total sales quantity of Yamama Cement increased +37.8% yoy to 1.42mn tons in Q1 20, higher than our estimates of 1.29mn tons. This growth is higher than the +32.9% yoy increase in local cement industry sales in Q1 20 and represents Yamama Cement’s highest sales quantity since Q1 16. The strong sales growth was recorded mainly in March 2020 with total sales of 0.53mn tons (+42.3% yoy). 

Sales increased +35.6% yoy to SAR290mn, coming broadly in line with our estimates of SAR265mn. Selling prices decreased -1.6% yoy to SAR204/ton in Q1 20, coming in-line with NCBC’s estimates of SAR206/ton and Q4 19 levels of SAR206/ton. We believe the stable qoq prices for Yamama Cement and other cement players is a key positive. 

Gross margins expanded to 50.3% in Q1 20 vs 42.4% in Q1 19, higher than our estimates of 40.3%. The variance is due to lower than expected cost/ton of SAR101 (-15.1% yoy), which is the lowest level since 2015 and compares to our estimates of SAR123/ton. We believe the margin expansion is due to economies of scale as production increased. 

We are Neutral on Yamama Cement with a PT of SAR28.8. We believe the growth in volumes and margins are the key positives. However, demand outlook in 2020f is expected to be negatively impacted by Covid-19 developments.