Earnings Report /
Saudi Arabia

Saudi Cement Company: Q2 20 results - Strong recovery in June sales support earnings

  • Net income declined -19.3% yoy (-49.5% qoq) to SAR75mn, it was higher than the NCBC estimates of SAR58mn.

  • Total cement and clinker sales of Saudi Cement stood at 1.52mn tons (-2.1% yoy) in Q2 20

  • Revenues declined -12.1% yoy to SAR298mn, but came higher than our estimates of SAR244mn

Iyad Khalid Ghulam
Iyad Khalid Ghulam

Head of Equity Research

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SNB Capital
13 August 2020
Published bySNB Capital

Saudi Cement reported a net income of SAR75mn (-19.3% yoy), but came higher than our estimates of SAR58mn. Average selling prices and cost/ton were in-line with our estimates, we believe the variance was mainly due to higher than expected sales quantities, driven by a strong recovery in June following the easing of COVID-19 related restrictions.

Saudi Cement reported better than expected set of Q2 20 results. Although net income declined -19.3% yoy (-49.5% qoq) to SAR75mn, it was higher than the NCBC and consensus estimates of SAR58mn and SAR67mn, respectively. The variance was mainly due to higher than expected sale volumes. Gross margin was broadly flat yoy at 41.6%, and in line with our estimates.

Total cement and clinker sales of Saudi Cement stood at 1.52mn tons (-2.1% yoy) in Q2 20, coming higher than our estimates of 1.27mn tons. Overall selling volumes showed a strong recovery in the month of June. The company sold 0.79mn tons (+79.8% yoy) in June, following to 0.41mn tons and 0.32mn tons sold in April and May, respectively. Cement sales of Saudi Cement declined -14.5% yoy to 1.17mn tons in Q2 20, underperforming the industry sales growth of 5.5% yoy. However, clinker exports grew +83.3% yoy to 0.35mn tons, significantly outperforming the industry’s average decline of -60.4% yoy.

Revenues declined -12.1% yoy to SAR298mn, but came higher than our estimates of SAR244mn, mainly due to higher than expected selling quantities. Average selling price stood at SAR195/ton (-10.3% yoy), coming in line with our estimates of SAR192/ton and Q1 20 levels of SAR197/ton.

Gross margin was broadly flat yoy at 41.6%, in line with our estimates of 41.7%. Average cost/ton declined -10.5% yoy to SAR114/ton, coming in line with our estimates of SAR112/ton. The decline in production cost offset the yoy decrease in prices. SG&A expenses were similar to last year at SAR41mn and our estimates of SAR39mn.

Although demand for cement might be impacted by COVID-19 related measures, we believe strong demand from the Ministry of Housing projects will continue to support demand in the short-term. We await full results to update our PT and estimates.