Saudi Cement Q1 2019 profit below estimate, says Aljazira Cap

Saudi Cement Co.’s Q1 2019 net profit of SAR 132.4 million fell shy of Aljazira Capital’s estimate of SAR 147.7 million.

“The Y/Y decline is mainly attributed to an increase in COGS and OPEX. The deviation of Q1-19 earnings from our estimates is mainly ascribed to higher than expected cost per tonne and OPEX,” Aljazira Capital said in an earnings note.

Sales revenue reached SAR 390.4 million, above the brokerage firm’s estimate of SAR 352.1 million.

Operating profit which came in at SAR 141.2 million also beat Aljazira Capital’s forecast of SAR 29.5 million.

“We expect the company to export 1.66MT of clinker and cement, which can potentially result in revenues in-excess of SAR 300mn. The company has an inventory of 5.3MT, which will be enough to cover more than 100 percent of the total sales volume during the year,” the report issuer said.

The cement producer is projected to record a net profit of SAR 412.8 million for the current fiscal year, a rise of 3.1 percent when compared to 2018.

In addition, mega projects and other housing initiatives are the key growth driver for the Saudi cement sector and could be realized beyond fiscal year 2019.

Aljazira Capital downgraded Saudi Cement to “underweight”, setting the stock’s target price at SAR 56.50.