Saudi Cement net profit down 37pc in Q1

Saudi Cement has registered a 37 per cent drop in its net profit for the first quarter which fell to SR165 million ($44 million) from SR265 million ($70.5 million) last year owing to the drop in sales volume and sale price as a result of sluggish demand.

This was in line with the estimate of SR161 million as well as consensus forecast of SR167 million, said a report by top Saudi lender Al Rajhi Capital.

One of the kingdom's largest cement firms by market value, Saudi Cement also saw its net profit fall 12 per cent quarter-on-quarter (q-o-q). it added.

Despite weaker volumes, helped by locational advantage, the company’s average realized price marginally declined by three per cent y-o-y and was down two per cent q-o-q, as compared to deep discounts offered by other cement companies, according to Al Rajhi Capital report.

Saudi Cement’s gross profit declined 35 per cent y-o-y to SR191 million, impacted by the decline in the top-line as well as the increase in cost per ton by four per cent y-o-y.

However, Al Rajhi pointed out that the company holds the highest level of inventory in the sector (5.1 million tonne), which could give it an advantage over its peers in the coming quarters after any potential removal of energy subsidies.

"However, the advantages are unlikely to sustain due to increasing competition amid weak demand outlook, which may lead the company to offer discount in coming few months. We continue with our neutral rating on the stock and an unchanged target price of SR55 per share,"