Earnings Report /
Saudi Arabia

Yanbu Cement Co: Strong results on higher prices and margins

  • Total sales quantities during Q3 22 stood at 1.73mn tons (+25.1% yoy, -2.8% qoq)

  • Local cement sales stood at 1.07mn tons (+4.8% yoy, +12.1% qoq)

  • Revenue increased 26.1% yoy (10.1% qoq) to SAR262mn

SNB Capital
27 October 2022
Published bySNB Capital

Yanbu Cement reported a strong set of Q3 22 results with a net income increasing by 90.3% yoy (+44.2% qoq) to SAR69.3mn. This is higher than the SNB Capital and consensus estimates of SAR45.3mn and SAR50.0mn, respectively. We believe the positive variance in earnings is mainly due higher than expected selling prices which stood at SAR151/ton higher by 0.8% yoy (+13.2 qoq). Production cost stood at SAR100/ton in line of our estimate. As a result, gross margins improved by 972bps to 34.1% vs 24.3% in Q3 21 and our estimates of 25.9%.

  • Total sales quantities during Q3 22 stood at 1.73mn tons (+25.1% yoy, -2.8% qoq), and came in-line with our estimates of 1.73mn tons. This compares to the total industry growth of 14.3% yoy (+11.2% qoq).

  • Local cement sales stood at 1.07mn tons (+4.8% yoy, +12.1% qoq) underperforming the local industry increase of 7.4% yoy (+13.7% qoq) vs our estimates of 1.08mn tons. Clinker exports stood at 644,000 tons (+81.9% yoy, -19.9% qoq) outperforming the industry growth of 13.3% yoy (-25.1% qoq) in line with our estimates of 650,000 tons.

  • Revenue increased 26.1% yoy (10.1% qoq) to SAR262mn, came higher than our estimates of SAR234mn. Average selling prices stood at SAR151/ton (-0.8% yoy, 13.2% qoq) higher than our estimates of SAR135/ton.

  • Gross margins expanded by 972bps to 34.1% in Q3 22 and came higher than 24.3% in Q3 21 and our estimates of 25.9%. Cost/ton which stood at SAR100/ton vs SAR114/ton in Q3 21 and our estimates of SAR100/ton. Variance in gross margins came due to higher prices realization as compared to our estimates.

  • Operating expenses in Q2 22 increased by 7.4% yoy to SAR14.1mn vs SAR13.1mn in Q3 21 and our estimates of SAR13.0mn, while opex to sales ratio stood at 5.4% vs 6.3% in Q3 21 and our estimates of 5.6%. Net other expenses stood at SAR5.9mn vs SAR2.0mn in Q3 21 and our estimates of SAR2.3mn.

Outlook

Based on our last update, we are Neutral on Yanbu Cement with a PT of SAR37.7. The recovery in prices and improved margins is key positive for the result. Moreover, we expect the company to benefit from its close proximity to mega projects in the long-run. The stock currently trades at a 2023f PE of 23.9x, higher than its covered peers average of 19.4x.