Yamama Cement’s Q1 misses estimates on soft demand, says Albilad Cap

Yamama Cement Co. reported a net profit of SAR 23.8 million in the first quarter, missing Albilad Capital’s estimate of SAR 34 million and analysts’ consensus of SAR 25 million, the research firm said in a report.

The cement firm’s earnings in Q1 fell 53 percent year-on-year (YoY), but rose 41 percent quarter-on-quarter (QoQ).

The YoY slump in bottom line during Q1 2018 was driven by several reasons, including the drop in volume sales on weak demand in the local market as well as the decrease in other income.

However, the growth in net profit quarter-on-quarter (QoQ) was triggered by an impairment charge of SAR 21 million in Q4 2017.

Average selling prices during Q1 2018 hit SAR 189 per ton compared with SAR 196 in Q4 2017.

“We expect selling prices will continue to fluctuate until the local demand recovers, as a result of the tough competition among companies coupled with high levels of clinker stocks, in addition to the difficulty of benefiting directly from the cancellation of the export tariffs,” Albilad Capital said.

The firm has a “Neutral” rating on Yamama Cement, maintaining target price at SAR 16.

Going forward, the gradual removal of subsidies on energy products will significantly impact profitability margins, the report said.