Equity Analysis /
Saudi Arabia

Saudi Cement Sector Monthly – Ramadan effect impacts sales

    Mohamed Tomalieh
    Mohamed Tomalieh

    Associate, Equity Research Analyst

    SNB Capital
    23 June 2019
    Published bySNB Capital

    In May 2019, local cement sales continued its negative trend, declining -23.5% yoy to 2.5mn tons, taking ytd declines to -11.2% yoy. Overall cement and clinker sales declined -12.7% yoy (3.3mn tons), partially offset by 62.1% yoy growth in export sales. Despite the muted demand, as demand from mega projects remains limited, we believe the weakness was also due to the Ramadan effect. Ramadan began on 6th May in 2019 vs 17th May in 2018.

    Local sales: Local cement sales declined -23.5% yoy to 2.5mn tons in May 2019. This took ytd declines to -11.2% yoy.

    Export sales: Cement exports stood at 0.13mn tons in May 2019 vs 0.11mn tons in May 2018. Clinker exports stood at 0.65mn tons in May 2019 vs 0.37mn tons in May 2018.

    Production: Clinker production declined -6.7% yoy to 4.0mn tons in May 2019. This took ytd production decline to -2.0% yoy.

    Inventory: Clinker inventory increased +13.9% yoy (+1.4% mom) to 41.2mn tons in May 2019.

    Market share: Saudi Cement gained the largest market share on local sales at +242bps to 14.2%, while United Cement lost -166bps to 3.0%.

    Outlook: We believe exports will support overall sales performance in H1 19, with demand from mega projects expected as of Q1 20. We believe companies in the Western region are best positioned to benefit from both export opportunities and demand from mega projects.