Earnings Report /
Saudi Arabia

Saudi Cement Company: Strong Q4 19 results on higher volumes and lower cost/ton

  • Net income increased by 15.0% yoy to SAR144mn

  • Sales increased 32.5% yoy to SAR403mn, higher than our estimates of SAR365mn

  • The company still has lower growth prospect than peers; we are Underweight on Saudi Cement, with a PT of SAR61.6

Mohamed Tomalieh
Mohamed Tomalieh

Associate, Equity Research Analyst

Follow
SNB Capital
4 March 2020
Published bySNB Capital

Saudi Cement reported a better-than-expected set of Q4 19 results. Net income stood at SAR144mn (+15.0% yoy), coming in higher than our estimates of SAR97mn. We believe the variance was driven by a combination of higher-than-expected selling quantities and a lower-than-expected cost/ton. Selling prices stood at SAR203/ton, in line with our estimates of SAR202/ton and Q3 19 levels of SAR208/ton.

NCBC view on the results:

Saudi Cement reported a strong set of Q4 19 results, with net income increasing +15.0% yoy to SAR144mn. This is higher than the NCBC and consensus estimates of SAR97mn and SAR115mn respectively. We believe the variance was mainly due to higher than expected selling quantities of 1.98mn tons (+21.8% yoy) vs our estimates of 1.80mn tons. The blended selling prices came in-line with our estimates. Moreover, a lower than expected cost/ton reflected positively on the results.

Sales increased +32.5% yoy to SAR403mn, coming higher than our estimates of SAR365mn. Total sales quantity of Saudi Cement (domestic and exports) increased +21.8% yoy to 1.98mn tons in Q4 19, coming higher than our estimates of 1.80mn tons. This is in-line with the industry’s performance of +20.2% yoy growth. Domestic sales grew by +20.4% yoy to 1.37mn tons, while exports increased +25.7% yoy to 0.61mn tons. Blended selling prices increased +8.7% yoy to SAR203/ton, coming in-line with our estimates of SAR202/ton and Q3 19 levels of SAR208/ton.

Gross margins contracted by -362bps yoy to 48.9% in Q4 19. However, it came higher than our estimates of 40.1%. We estimate the company’s cost/ton to stand at SAR104/ton (+17% yoy) vs our estimates of SAR121/ton. We believe the variation is due to higher than expected exports of clinker. Opex increased +9.4% yoy to SAR39mn vs our estimates of SAR42mn. Non-operating expenses stood at SAR14mn in Q4 19 vs profits of SAR1.2mn in Q4 18 and our estimates of an expense of SAR7mn, which we believe is due to higher financing costs and lower other income.

We are Underweight on Saudi Cement, with at PT of SAR61.6. We believe the company has lower growth prospect than its peers and will continue to depend on exports to support its top line due to its geographic location in the Eastern region where demand from Mega Projects is expected to be limited.