Maaden’s Q1 beats estimates, says Aljazira Cap

Saudi Arabian Mining Company’s (Maaden) Q1 net profit of SAR 275.6 million (up 42 percent YoY), was higher than Aljazira Capital’s estimates of SAR 67.2 million and the market consensus of SAR 113.3 million, Aljazira Capital said in a review.  

The company attributed the strong YoY result to a 20 percent increase in sales, cost reduction initiatives, and higher contribution from its jointly controlled entity Maaden Barrick Copper Co. that stands at SAR 11 million.

In Q1, sales of ammonia increased 97 percent YoY due to the start of commercial operation of the Maaden Waad Al Shamal ammonia plant. Ammonia average sales price fell 4.6 percent YoY, but an increase of 65.4 percent QoQ.

Sales of gold during the quarter increased significantly by 71 percent due to the commencement of Ad Duwayhi mine on April 1, 2016.

“We believe that despite an increase in finance charge and lower income from short-term investments, the positive contribution from jointly controlled entities, higher production efficiency and lower OPEX have positively affected earnings in Q1 2017,” the brokerage added.

Maaden is expected to post SAR 1.5 billion in net income for FY17, recording an increase of 282 percent YoY due to higher OPEX control, better margin and the commencing of new plants.

Gross margin stood at 34.1 percent in Q1-17 vs. 17.9 percent in Q4-20 which is the highest since Q1-13, owing to 8 percent YoY reduction in cost of sales.

“We expect the company to remain highly leveraged in the near to medium-term, restricting its liquidity and ability to pay dividends in 2017/18 year”, Aljazira Cap added.

Maaden was reiterated at ‘Neutral’, with a target price of SAR 43.50.