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Yamama Cement: Q1 21 results in line, but prices remain weak

  • In Q1 21, Yamama Cement’s total selling quantities stood at 1.05mn tons (-26.3% yoy)
  • Revenue declined 37.8% yoy to SAR180mn, but was in line with our estimates
  • Gross margins contracted to 39.8% in Q1 21 vs 50.3% in Q1 20 but were line with our estimates

Yamama Cement reported an in-line set of Q1 21 earnings, with a net income of SAR55mn (-55.7% yoy, -51,8% qoq). This is compared to the NCBC and consensus estimates of SAR56mn and SAR54.5mn, respectively. Sales declined 37.8% yoy to SAR180mn, in line with our estimates of SAR175mn. We  highlight that sales volumes declined 26.3% yoy which we believe is due to the relocation to the new plant. Moreover, we believe cement selling prices stood at SAR172/ton (flat qoq), lower than our estimates of SAR178/ton.

In Q1 21, Yamama Cement’s total selling quantities stood at 1.05mn tons (-26.3% yoy), higher than our estimates of 0.98mn tons

Domestic cement sales decreased 30.5% yoy to 0.99mn tons in Q1 21, compared to the local industry’s growth of 5.3% yoy which we attribute to the relocation of the plant.

Revenue declined 37.8% yoy to SAR180mn, but was in-line with our estimates

The yoy weakness was mainly due to a 15.6% yoy decline in average selling prices to SAR172/ton (flat qoq) which was lower than our estimates of SAR178/ton. We believe the weakness in selling prices is due to increased competition in the local cement market, specifically in the central region. Muted selling prices is a key concern which we believe could be reflected on the results of other cement companies in Q1 21.

Gross margins contracted to 39.8% in Q1 21 vs 50.3% in Q1 20 but were line with our estimates

Cost/ton is estimated at SAR104/ton (+2.2% yoy), in line with our estimates. We believe the low average cost is attributed to the full deprecation of South Riyadh plant.

On 20 April 2021, Yamama Cement announced the transfer of Production Line No. 7 from the old plant located in South Riyadh to the new plant located in Al Kharj

The production capacity of the line is 10,000 tons of clinker per day (c3.2mn tons annually). The production capacity at the new site is expected to reach 30,000 tons of clinker per day (c9.9mn tons annually).

We are Neutral on Yamama Cement, with a PT of SAR31.5

Yamama Cement is expected to start production from the new facility this year which we believe might impact their short-term performance. However, the potential sale of its old factory is a key catalyst. The stock trades at 2021f PE of 29.0x compared to the peer group average of 20.7x.


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