Earnings Report /
Saudi Arabia

Yamama Cement: Q3 19: Weak results on lower-than-expected sales volume

    Mohamed Tomalieh
    Mohamed Tomalieh

    Associate, Equity Research Analyst

    SNB Capital
    16 October 2019
    Published by

    Yamama Cement reported a weaker-than-expected set of Q3 19 results, with net profit of SAR55mn vs a net loss of SAR46mn in Q3 18. This compares with the NCBC and consensus estimates of SAR60mn. We believe the deviation is mainly from lower-than-expected volumes, as selling prices coming in line with our estimates.

    Yamama Cement reported a weaker-than-expected set of Q3 19 results, with net profit of SAR55mn vs a net loss of SAR46mn in Q3 18. This is lower than the NCBC estimates of SAR60mn. The deviation is primarily on account of lower-than-expected sales, which was 6.7% lower than our estimates. Also, non-operating expenses were slightly higher than our expectations.

    Sales increased 73.1% yoy to SAR187mn, but was lower than our estimates of SAR200mn. Total sales quantity of Yamama Cement declined 18.4% yoy to 0.91mn tons in Q3 19. This is lower than our estimate of 0.97mn tons and significantly weaker than the 10.0% yoy increase in local cement industry sales in Q3 19. We attribute this to relatively lower demand in the Central region. Selling prices increased 112.1% yoy to SAR206/ton in Q3 19, coming in line with NCBC’s estimates and Q2 19 levels of SAR207/ton. We believe the qoq flat prices for Yamama Cement and potentially for other cement players in the Central and Western regions is a key positive. 

    Gross margins expanded to 40.8% in Q3 19 vs -22.9% in Q3 18, and compared to our estimates of 39.5%. We believe the positive variance in gross margins is due to marginally lower cost per ton of SAR122/ton (+2.1% yoy) compared with our estimates of SAR125/ton. 

    We are Neutral on Yamama Cement with a PT of SAR19.3. We believe the continued yoy improvement in selling prices for Yamama Cement and potentially the remaining players is a key positive. However, yoy decline in sales volume for Yamama Cement remains a key concern. We expect further clarity on the timeline of Mega projects to be the key catalyst for an improvement in cement demand in Saudi going forward.