NCB Capital assigns 'neutral' rating on SAFCO

NCB Capital assigned 'neutral' recommendation on Saudi Arabian Fertilizers Co. (SAFCO) stock, setting the 12-month price target at SAR 58 a share, despite the company's net income falling sharply in Q4 2017.

The 76-day shutdown at SAFCO 4 and 25-day shutdown at SAFCO 5 resulted in the Q4 profit tumbling.

Net income declined to SAR 63 million, the lowest in over a decade, compared to its estimate of SAR 178 million due to temporary closure of facilities and higher production cost, the bank said.

However, revenues reached SAR 616 million, 8 percent higher than NCB's estimate of SAR 571 million as SAFCO facilities operated at 73 percent compared to the bank's estimate of 68 percent.

Urea prices rose 16.5 percent year-on-year (YoY) to $261, while ammonia prices increased 64.4 percent YoY to $305 in Q4 2017.

Expansion of SAFCO 4 and strong balance sheet are key positives, the bank said, adding. muted urea outlook remains the primary risk.