Saudi Cement posts in-line results for Q1, says NCB Cap

Saudi Cement Co.’s net profit dropped 31.7 percent year-on-year (YoY) to SAR 165 million for Q1 2017, coming in line with NCB Capital’s estimate of SAR 171 million, the brokerage said in an earnings review.

“We believe the YoY decline is due to lower quantities sold and selling prices, as Saudi Cement offered slight discounts to maintain market share,” the report said.

Revenue reached SAR 346 million, 4.5 percent lower than the estimate of SAR 362.4 million. Total sales of SAR 1.47 million tons in the same period matched the brokerage’s forecast of 1.51 million tons.

Gross margins dropped to the lowest level since Q2-2013 at 55.2 percent in Q1-2017, compared to the brokerage’s expectations of 55.4 percent.

Selling prices stood at SAR 235 a ton, versus NCB Capital’s estimate of SAR 240 a ton.

“We believe discounts offered by smaller players in remote regions to sell in high demand areas may lead to further discounts for Saudi Cement going forward,” the report added.

Key downsides are further price discounts and continued demand weakness.

The brokerage firm downgraded Saudi Cement to “neutral”, cutting the stock’s target price to SAR 69.1 from SAR 75.8.