Yanbu Cement makes robust profit in Q2 2022, expects pricing pressures to remain: CEO

Ali Al-Ayed CEO of Yanbu Cement Co.

Yanbu Cement Co. (YCC) reported robust earnings for the second quarter of 2022, despite fierce competition in the Western Region’s markets, as well as the fall of the holy month of Ramadan and Eid holidays during the quarter, with no non-operating profit, CEO Ali Al-Ayed told Argaam in a phone call.

The strong performance was driven by consumers’ appetite for Yanbu Cement’s products, which are distinguished for high quality, improved selling prices and lower production costs amid increased clinker output, compared to the first half of 2021.

The company started to reap fruits from its strategy that aims to maintain production sustainability by an overall revamp of the fourth production line, which was upgraded last year, Al-Ayed elaborated. This was reflected on the efficient utilization of Yanbu Cement’s resources and cost reduction, he added.

Clinker output in Q2 2022 jumped 50% year-on-year (YoY) to 1.5 million tons, bringing the first-half total to 3.2 million tons, up 46 YoY.

The Tadawul-listed cement producer exported 829,000 tons and 400,000 tons of clinker during the second and first quarters of 2022, respectively, most of which was directed to West Africa and some South Asian countries.

Commenting on the average selling prices, Al-Ayed said the company uses a flexible pricing strategy based on market data, so the price average changes accordingly.

He added that there is still a gap between supply and demand, as companies in the Kingdom have large production capacities of more than 75 million tons annually, while demand is still around 50 million tons.

This led clinker stocks to exceed 35 million tons at the end of the period, implying an increase of two million tons compared with a year before, the CEO noted, expecting pressures on selling prices to continue.

He added that the mega projects, including housing projects, will significantly increase demand for cement, indicating that Yanbu Cement is watching project updates, as it has succeeded so far to be an accredited supplier to Red Sea Co. and Jeddah Central Development Co.

Touching on the acquisition of Shuaiba Industrial Co.'s stake in Yanbu Saudi Kuwaiti Paper Products Co., Al-Ayed said the main purpose of establishing the paper manufacturer is the proximity of the paper factory to the cement plant to fulfill its needs at the lowest possible cost with a reliable supply.

On the other hand, Al-Ayed concluded that the cement producer was unable to expand over the last period as the foreign partner did not agree on this move. Accordingly the partners studied the available options and agreed to exit at net book value.

YCC reported a net profit after Zakat and tax of SAR 87 million in H1 2022, down 25%, from SAR 115.2 million in a year-earlier period. The second-quarter net profit rose 15% year-on-year (YoY) to SAR 48 million, Argaam earlier reported.