Tasnee’s Q2 income misses estimates, NCB Cap

National Industrialization Co.’s (TASNEE) net income of SAR 93.6 million for the second quarter of 2017 was lower than NCB Capital’s estimate of SAR 123.4 million and below consensus estimate of SAR 133 million, the brokerage said in an earnings report.

“We believe lower than expected gross margin led to the variance in earnings. Gross margin stood at 15.9 percent in Q2 2017, lower than our estimate of 19.5 percent,” NCBC said.

Tasnee’s Q2 revenues at SAR 2.67 billion were in-line with the brokerage firm’s estimate. The higher revenues, according to NCBC, can be attributed to higher TiO2 prices.

The company’s industrial segment operated at 90 percent in the second quarter, which NCBC said was lower than its estimate of 93 percent.

Gross margin stood at 15.9 percent in Q2, lower than NCBC estimate of 19.5 percent.

“We believe higher than expected cost of operations at Cristal facilities offset the positive impact of higher TiO2 prices,” the report said.  

Tasnee’s share in the income from the petrochemical segment stood at SAR 253 million in Q2, on par with estimates.

NCB Capital maintained “neutral” on Tasnee with a target price of SAR 14.5.

The brokerage said Tasnee’s key risks include normalizing PP-propane spread, high debt levels, delays in operating the slag facility, and the lack of operational visibility following the deconsolidation of the petrochemical segment.

“However, ongoing improvement in TiO2 prices is a key positive,” NCBC added.