Yamama Cement's Q1 surpasses forecasts: Aljazira Cap

Yamama Cement posted net income of SAR 70.6 million in Q1 2019 , which beat Aljazira Capital's and market consensus estimates of SAR 14.8 million and SAR 19.0 million, respectively, Aljazira Capital said in a report.

"We believe that the strong growth is mainly attributed to 33.9 percent QoQ increase in selling price. The deviation of Q1-19 earnings from our estimates is mainly ascribed to higher than expected sales prices, resulting in higher revenue and margins," the brokerage added.

Revenue came at SAR 213.9 million, 35.2 percent above estimates due to higher than expected selling price of SAR 208/ton, against estimates of SAR 154/ton.

Yamama is expected to be highly leveraged by FY20, with long-term obligation of SAR 3.5bn; limiting its ability to pay dividends. Aljazira revised recommendation to “Neutral” on the stock with a TP at SAR 18.40/share.

Aljazira Capital expected the cement sector to start recovering from its current downtrend due to producer’s concentration on selling prices and an increase in export sales. Selling prices are also expected to sustain the high level in FY19. Furthermore, mega projects and other housing initiatives are the key growth driver for the Saudi cement sector and could be realized beyond FY19. The commercial production of new plant is expected to commence in Q4 2020 with design capacity of 6.4MT/annum.

"Yamama Cement is expected to post SAR 237.4 million in net income for FY19; against a net loss of SAR 51.8 million in FY18, driven by improved selling prices and sales volume," the brokerage noted.