Earnings Report /
Saudi Arabia

Saudi Cement Company: Q3 22 Results Analysis | Higher prices support lower quantities

  • Total selling quantities during Q3 22 stood at 1.70mn tons (-8.9% yoy, -3.1% qoq)

  • Revenues increased by 7.6% yoy (-6.0% qoq) to SAR328mn, and came in-line with our estimates of SAR333mn

  • Gross margins expanded by 215bps yoy to 37.9% in Q3 22, but came lower than our estimates of 39.1%

SNB Capital
10 November 2022
Published bySNB Capital

Saudi Cement reported broadly in-line set of Q3 22 results, with a net income increasing 37.4% yoy (-21.3% qoq) to SAR80.7mn. This compared to the SNB Capital estimates of SAR86.5mn, and significantly lower than the consensus estimates of SAR96.7mn, respectively. Revenues grew 7.6% yoy (-6.0% qoq) to SAR328mn in-line with our estimate of SAR333mn. We believe the variance in earnings is mainly driven by 1) lower gross margins which stood at 37.9% vs our estimate of 39.1% due to an increase in production costs. 2) higher non-opex which stood at SAR5.0mn vs SAR4.0mn in Q3 21 and our estimate of SAR0.8mn, mainly driven by higher finance charges and decline in other income. 

  • Total selling quantities during Q3 22 stood at 1.70mn tons (-8.9% yoy, -3.1% qoq) and came lower than our estimates of 1.77mn tons. This compares to the total industry growth of 14.3% yoy (+11.2% qoq). Cement sales stood at 1.61mn tons (+18.8% yoy, +22.2% qoq), while clinker sales fell to 87,000 tons as compared to 503,000 tons in Q3 21 and 434,000 tons in Q2 22.

  • Revenues increased by 7.6% yoy (-6.0% qoq) to SAR328mn, and came in-line with our estimates of SAR333mn. The yoy increase in revenues was mainly driven by increase in average selling prices which stood at SAR193/ton vs SAR164/ton in Q3 21 and our estimate of SAR188/ton. We believe the growth in prices is the key highlight of the results.

  • Gross margins expanded by 215bps yoy to 37.9% in Q3 22, but came lower than our estimates of 39.1%. We believe the expansion in margins is due to higher selling prices while the negative variance is driven by an increase in production costs. Cost/ton stood at SAR120/ton (+14.1% yoy, +3.5% qoq) vs our estimate of 115/ton.

  • Opex in absolute terms decreased by 16.4% yoy to SAR38.7mn and came lower than our estimates of SAR43.0mn while opex to sales ratio stood at 11.8% vs 15.2% in Q3 21 and our estimate of 12.9%. The variance is mainly due to lower selling and distribution expenses.

  • Net other expenses stood at SAR5.0mn compared to SAR4.0mn in Q3 21 and our estimate of SAR0.8mn. We believe the yoy increase and variance was mainly driven by higher finance charges and decline in other income.

Outlook

Based on our last update, we are Neutral on Saudi Cement with a PT of SAR53.5. Growth in selling prices and lower opex are the key highlights of the result while decline in volume and higher production costs are the concerns. The stock currently trades at a 2023f PE and EV/EBITDA of 21.2x and 12.6x, compared to the covered peers average of 18.9x and 12.3x, respectively.