Earnings Report /
Saudi Arabia

Yamama Cement: Strong results on higher prices and other income

  • Total selling quantities increased +55.9% yoy to 1.32mn tons in Q2 22, in-line with our estimates of 1.33mn tons

  • Revenue increased 3.3% yoy (-5.5% qoq) to SAR209mn and came higher than our estimates of SAR179mn

  • Gross margins expanded by 78bps yoy to 48.1% in Q2 22, vs our estimates of 29.6%

SNB Capital
26 July 2022
Published bySNB Capital

Yamama Cement reported strong set of Q2 22 results with a net income increasing 16.8% yoy to SAR90.7mn. This is higher than the SNBC and consensus estimates of SAR37.2mn and SAR47.4mn. The positive variance in earnings is mainly driven by higher than expected selling prices which stood at SAR158/ton vs our estimate of SAR135/ton, while selling quantities increased by 55.9% yoy (-36.2% qoq) to 1.32mn tons and came in-line with our estimates. This resulted in a revenue of SAR209mn (+3.3% yoy, -5.5% qoq), higher than our estimate of SAR179mn.

  • Total selling quantities increased +55.9% yoy (-36.2% qoq) to 1.32mn tons in Q2 22, in-line with our estimates of 1.33mn tons, but significantly outperformed the industry on a yoy basis which declined by 6.4% yoy.

  • Revenue increased 3.3% yoy (-5.5% qoq) to SAR209mn and came higher than our estimates of SAR179mn. Average selling prices stood at SAR158/ton (-33.7% yoy, +48.0% qoq) higher than our estimate of SAR135/ton. Strong qoq recovery in the selling prices is a key highlight of the results.

  • Gross margins expanded by 78bps yoy to 48.1% in Q2 22, vs our estimates of 29.6%. The yoy expansion and variance in gross margins was supported by improvement in selling prices as well as decline in production costs. Average cost/ton stood at SAR82.1/ton (-34.7% yoy, -5.9% qoq), lower than our estimate of SAR95.0/ton.

  • Operating expenses in absolute terms increased 27.0% yoy to SAR19.7mn vs our estimate of SAR16.0mn while opex to sales ratio stood at 9.4% vs 7.7% in Q2 21 and our estimate of 8.9%.

  • Other non-operating income in Q2 22 stood at SAR9.6mn compared to a non-operating expense of SAR2.8mn in Q2 21. We believe the variance is driven by higher investment income and offsets the negative impact of higher opex on earnings.

Outlook

Based on our last update, we are Neutral on Yamama Cement with a PT of SAR28.0. Growth in selling quantities and strong qoq recovery in selling prices are the key positives of the results. We expect the company to benefit from the close proximity to central region construction projects. Moreover, we believe the completion of the move to the new factory will support margins in the upcoming periods. The stock currently trades at a 2022f PE and EV/EBITDA of 24.1x and 16.7x, respectively vs covered peers average of 19.9x and 13.0x, respectively.