Yanbu Cement’s Q1 2019 earnings exceed forecasts: Al Rajhi Cap

Yanbu Cement reported Q1 net profit of SAR 72.5 million (+81 percent YoY and +109 percent QoQ), beating Al Rajhi Capital’s estimates of SAR 37 million and consensus estimates of SAR 41 million respectively, Al Rajhi Capital said in a report.

The profit beat was mainly driven by higher-than-expected average prices realized in the local region, given the company’s continued strategy of maintaining pricing power, the brokerage added.

However, local sales volume decreased significantly (-43 percent YoY, -11 percent QoQ).

Yanbu was able to increase export by around 124 percent QoQ to 0.07 million cement and 0.94 million clinker.

“Going forward, we expect local demand to deteriorate in the coming quarter due to seasonality factors, including the holy month of Ramadan, and Eid as well as summer vacation; however, companies will be able to continue maintaining current high level of prices for the short term,” Al Rajhi noted.

Al Rajhi Capital also expected Yanbu to focus on export as a solution to liquidate the high level of inventory it has (4.3 million tons, or 118 percent of last twelve month sales).

“We remain Neutral on Yanbu Cement stock, with a new TP of SAR27.5/share,” Al Rajhi Cap said, adding: “We believe Saudi cement companies have the ability to maintain the price balance and keep current prices levels. As such, we have changed our future prices forecast, also we recalculated export revenue based on the new level.”