Earnings Report /
Saudi Arabia

Yanbu Cement Co: Q2 22 – Higher prices and lower costs

  • Total sales quantities during Q2 22 stood at 1.78mn tons (+4.2% yoy, +4.7% qoq)

  • Local cement sales stood at 0.95mn tons (-11.8% yoy, -26.9% qoq) underperforming the local industry

  • Gross margins expanded by 483bps to 26.7% in Q2 22 and came higher than 21.9% in Q2 21 and our estimates of 12.4%

SNB Capital
27 July 2022
Published bySNB Capital

Yanbu Cement reported a strong set of Q2 22 results with net income increasing by 14.8% yoy (+23.4% qoq) to SAR48.0mn. This is higher than the SNB Capital and consensus estimates of SAR15.5mn and SAR30.0mn, respectively. We believe the positive variance in earnings is mainly due to 1) higher than expected selling prices which stood at SAR134 vs our estimates of SAR128 and 2) lower production costs as cost/ton stood at SAR98, compared to our estimates of SAR112. As a result, gross margins improved by 483bps to 26.7% vs 21.9% in Q2 21 and our estimates of 12.4%.

  • Total sales quantities during Q2 22 stood at 1.78mn tons (+4.2% yoy, +4.7% qoq), and came in-line with our estimates of 1.80mn tons. This compares to the total industry decline of 1.7% yoy (-15.5% qoq).

  • Local cement sales stood at 0.95mn tons (-11.8% yoy, -26.9% qoq) underperforming the local industry decline of 5.6% yoy (-22.5% qoq) and lower than our estimates of 1.05mn tons. Clinker exports stood at 0.83mn tons (+31.6% yoy, +108% qoq) outperforming the industry growth of 11.4% yoy (+34.1% qoq) and higher than our estimates of 0.75mn tons.

  • Revenue decreased 1.9% yoy (-1.4% qoq) to SAR238mn, but came marginally higher than our estimates of SAR230mn. Average selling prices stood at SAR134/ton (-5.8% yoy, -5.9% qoq) higher than our estimates of SAR128/ton.

  • Gross margins expanded by 483bps to 26.7% in Q2 22 and came higher than 21.9% in Q2 21 and our estimates of 12.4%. We believe the variance in gross margins is due to lower than expected production costs as cost/ton stood at SAR98 vs SAR111 in Q2 21 and our estimates of SAR112.

  • Operating expenses in Q2 22 increased by 27.3% yoy to SAR12.8mn vs SAR10.1mn in Q2 21 and our estimates of SAR13.1mn. Opex to sales ratio stood at 5.4% vs 4.1% in Q2 21 and our estimates of 5.9%. Net other expenses stood at SAR2.8mn vs SAR1.6mn in Q2 21 and our estimates of net other income of SAR0.5mn.

Outlook

Based on our last update, we are Neutral on Yanbu Cement with a PT of SAR37.7. Although continued pressure on selling prices is a key concern, we expect the company to benefit from its close proximity to giga projects in the long-run. The stock trades at a 2022f PE of 23.7x, higher than its peers average of 20.1x..