Yamama Cement’s Q1 earnings miss estimates on lower sales: Riyad Capital

Yamama Cement Co.’s (YSCC) Q1 net profit of 24 million was below Riyad Capital’s estimates of SAR 34 million, but came in line with market expectations, the brokerage said in an earnings review.

Revenue of SAR 141 million came below projections of SAR 172 million due to lower sales volume as well as selling prices.

Sales volumes fell 40 percent year-on-year (YoY) and by 14 percent quarter-on-quarter (QoQ) due to record-low levels at 764,000 tons. Selling prices also fell 3 percent QoQ to SAR 189 per ton.

“We believe that Yamama offered lower prices during the quarter in an attempt to regain its market share. However, it failed to do so as its market share declined by 94 basis points (bps) to 6.3 percent in 1Q, the lowest since 2013,” the report said.

Gross profit fell 38 percent YoY and 28 percent QoQ to SAR 39 million, while gross margins decreased by 443 bps QoQ to 27.5 percent on lower revenues and higher cost of sales.

Clinker production was down by 14 percent YoY and 19 percent QoQ to 874,000 tons, as Yamama adjusted inventory levels reached 5.5 million tons, taking the utilization rates to a multi-year low at 59 percent, it added.

Riyad Capital maintained a “neutral” rating on the stock with a target price of SAR 16 per share, but expected a re-rate as price and margins recover ahead.

“Yamama offers a dividend yield of 3.7 percent; though lower, but is utilizing its cash flows to fund its new plant, which is a good omen,” it added.