Saudi Cement Company: Q1 21 earnings decline yoy on lower selling prices
- Total cement and clinker selling quantities stood at 2.39mn tons (+4.4% yoy) in Q1 21
- In Q1 21, the industry’s export volumes grew to 2.73mn tons (+55.2% yoy), a record high, despite the impact of COVID-19
- Revenues declined by 4.7% yoy to SAR429mn and came in-line with our estimates
Saudi Cement reported an in-line set of Q1 21 earnings, with net income declining by 19.6% yoy (-3.8% qoq) to SAR119mn. This is in-line with the NCBC and consensus estimates of SAR115mn and SAR114mn, respectively. Sales declined 4.7% yoy SAR429mn, coming in-line with our estimates. The 4.4% yoy growth in sales volume was offset by an 8.7% yoy decline in average selling prices to SAR180/ton (+3.5% qoq).
Total cement and clinker selling quantities stood at 2.39mn tons (+4.4% yoy) in Q1 21 and was in-line with our estimates of 2.37mn tons. Local cement sales of Saudi Cement increased 4.0% yoy to 1.56mn tons, less than the local industry’s growth of 5.3% yoy. Export quantities increased 4.7% yoy to 826,000 tons and were their second highest quarterly exports on record.
In Q1 21, the industry’s export volumes grew to 2.73mn tons (+55.2% yoy), a record high, despite the impact of COVID-19. This was supported by the elevated clinker inventory for the sector, which decreased 17.3% yoy to 32.7mn tons in Q1 21 (-11.7% qoq). Moreover, Saudi Cement’s inventory decreased 28.4% yoy to 3.36mn tons (-14.7% qoq).
Revenues declined by 4.7% yoy to SAR429mn and came in-line with our estimates. Average selling prices declined by 8.7% yoy to SAR180/ton and were in-line with our estimates. We attribute the decline across the sector to the competitive nature of the local cement market, especially in the Central and Eastern regions. However, selling prices increased 3.5% on a qoq basis, which we believe is a key positive.
Gross margins contracted by 457bps yoy to 40.5%, in line with our estimates, as production costs were broadly flat yoy at SAR107/ton. Operating expenses increased 8.7% yoy to SAR49mn and were in-line with our estimates.
We are Neutral on Saudi Cement, with a PT of SAR66.9. We expect the company to benefit from the Riyadh expansion plan as the company has access to the Central region. The company is trading at a 2021f P/E of 19.5x, lower than the peer average 20.7x while offering an attractive 2021f dividend yield of 5.4%.
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