Najran Cement’s Q3 2021 profit hit by lower sales on labor force shortage, says CEO

Najran Cement CEO Abdulsalam Aldraibi

Najran Cement Co.’s net profit was hurt by lower sales volumes in Q3 2021, Chief Executive Officer (CEO) Abdulsalam Aldraibi told Argaam in an exclusive.

Sales volumes were significantly hit by a decline in exports amid slow movement in the Saudi-Yemen border during the third quarter of 2021, when compared to previous periods, in addition to an overall drop in the sector’s local cement sales.

Local cement sales have unexpectedly fallen since July by 19%. However, a less decrease was reported in August and September.

Due to lower sales volumes in July, Najran Cement preferred to take more time for its decisions, taking into account the public good of the cement industry and the company’s shareholders. The company conducted a market study on the sales drop, Aldraibi noted.

The study showed that most of the reasons for sales drop were temporary, of which the most important was the shortage of labor force with contractors operating in the construction sector. This in turn had a remarkable impact on demand, pushing back the execution of some projects. Moreover, the application of the new Saudi Building Code also had a clear impact on sales in July.

On the other hand, the CEO explained that a comparison of H1 2021 sales to the first half of 2020 is “unfair”, as last year’s period witnessed a higher-than-usual demand on eased COVID-19 precautionary measures following a full curfew in the second quarter of 2020 when cement sales steeply declined.

Najran Cement started operation of one of its suspended clinker production lines. Thus, two production lines are operating. Clinker production rose to 675,000 tons in the third quarter of the year, from 453,000 tons a year earlier.

“The outlook for Najran Cement is still bullish,” Aldraibi said, expecting a slight decrease in Q4 2021 sales, unless market conditions are unstable, as this depends on the time taken by the above reasons to fade.

Cement demand is expected to grow next year, Aldraibi concluded.

The cement producer posted a net profit after Zakat and tax of SAR 129.5 million for the first nine months of 2021, up 8% from SAR 120.5 million in the same period last year. The third-quarter net profit net profit after Zakat and tax dropped to SAR 36.1 million, Argaam reported.