Qassim Cement posts in-line Q1 profit, says Al Rajhi Cap

Qassim Cement Co.'s net profit of SAR 57.1 million for Q1 2018 came in line with Al Rajhi Capital and consensus' estimates of SAR 56.2 million and SAR 60.7 million, respectively.

"The company’s earnings were supported by higher other income as well as drop in Zakat expenses," the brokerage said in an earnings review.

The first-quarter revenue stood at SAR 148 million, in line with Al Rajhi Capital's forecast of SAR 141 million.

Qassim Cement is expected to report almost a drop of 10 percent year-on-year (YoY) drop in Q2 sales volumes, which implies a 14 percent quarter-on-quarter (QoQ) fall due to seasonal factors.

Meanwhile, the company reported a Q1 gross profit of SAR 63 million compared to the brokerage’s forecast of SAR 60 million.

The cement producer cut the cost per ton to SAR 92, which is forecast to remain at the same levels with a slight increase in the coming quarters.

The high inventory and stiff competition in sector coupled with the current modest demand led to the company to offer more discounts on the sale price, which declined to SAR 160 per ton in Q1 compared to SAR 178 per ton in Q4 2017.

Qassim distributed cash dividend of SAR 2.9 per share in 2017 and is likely to maintain the same payout ratio in the first half of this year, which implies a dividend of SAR 1.20 per share.

"As for 2018, we expect the company’s dividends to fall ~5 percent y-o-y (to SAR 2.7) on weak demand and low selling prices. This implies a dividend yield of 6.5 percent," the brokerage firm added.

Al Rajhi Capital maintained its "Neutral" recommendation on the stock, cut slashed its target price to SAR 42.5 from SAR 44.