Southern Cement’s Q1 misses estimates, says Aljazira Cap

Southern Province Cement Co. recorded net income of SAR 105.0 million (62.9 percent YoY and 30.9 percent QoQ) in Q1 2017, which is below Aljazira Capital’s estimates of SAR 155.6 million by 32.5 percent and below the market consensus by 28.7 percent, the brokerage said in a flash note on Q1 earnings.

This profit miss was mainly due to lower than expected selling price (a decline of 17.7 percent YoY) and higher cost per ton (an increase of 9.5 percent YoY).

The company reported revenues of SAR 303.0 million; a decline of 44.81 percent YoY and below estimates of SAR 334.7 million.

“We believe that the pressure on the sector’s fundamentals to continue for the upcoming quarters, due to high current capacity and higher inventories as demand remains weak. Aggressive discount on selling prices for upcoming quarters would have major impact on company profitability,” Aljazira Cap added.

Southern Cement is expected to post net income of SAR 426.9 million, a decline of 51.5 percent YoY in 2017.

Aljazira maintained a “Neutral” rating on the stock, with a target price of SAR 52.0.