Positive demand for cement likely to sustain in Q1 2021, selling prices to stabilize: Arabian Cement CEO

Badr Johar, CEO of Arabian Cement

The positive demand for cement in Saudi Arabia is expected to continue in Q1 2021 and average selling prices to stabilize, backed by the government’s housing projects, Badr Osama Johar, CEO of Arabian Cement Co. told Argaam.

Amid the projects and development plans previously announced, markets are expected to see a 6% growth year-on-year (YoY), he added.

Arabian Cement reported positive results despite the COVID-19 impact, as the Saudi government took various measures and launched initiatives to mitigate the pandemic’s negative impact on businesses.

The company’s Q4 2020 financials were directly impacted by the increase in clinker exports and local sales, which in turn hit profit margins, but positively supported cash flows, Johar explained, adding that the sales from Arabian Cement’s subsidiaries in Jordan were stable and showing positive results.

Arabian Cement also expanded exports in 2020 to over 700,000 tons of exported clinker, in addition to 460,000 tons of local clinker sales (domestic exports).

Johar added that export is a “key element” in the company’s plans, as it drives its cash flows. However, due to fierce competition from other countries, such as Egypt, there is a price competition.

Moreover, the company’s location near the King Abdullah Port, in Rabigh, granted Arabian Cement a competitive advantage in terms of the speed of loading, which exceeds 25,000 tons daily – a great advantage for export customers and a key attraction.

Commenting on the company’s new cement mills, Johar affirmed that the project is in final stages and is awaiting the arrival of European experts and the engineers of the main contractor, China National Building Materials (CNBM), to oversee trial operations and testing. The project faced delays, due to the COVID-19 precautionary measures and travel restrictions, Johar noted.

Arabian Cement’s current grinding capacity exceeds 6 million tons of cement annually, to meet rising market demand. In case new capacities are added, the company’s cement annual grinding capacity will cross the 9 million ton-mark.

Johar said that cement average selling prices, set by the Ministry of Commerce, is SAR 240 per ton, but they are declining based on the company’s marketing and promotion policy, and on the geographic location of target markets and seasons to offset the transportation cost variations and maintain the competitiveness of product prices compared to similar products in the same market.

The company’s clinker stockpiles fell to 3.1 million tons, compared to its highest level of 4.1 million tons in mid-2020, due to the inventory decline during April and May amid the outbreak of COVID-19 pandemic.

Meanwhile, the Tadawul-listed firm maintains its cement inventory, equivalent to four-six days of continuous sales to ensure uninterrupted deliveries to customers and meet growing demand directly without the need to modify production plans, Johar concluded.

According to data compiled by Argaam, the cement producer posted a net profit of SAR 184.9 million for 2020, compared with SAR 208.7 million a year earlie