Maaden misses loss estimates on lower product prices: Aljazira Cap

Saudi Arabian Mining Co.’s (Maaden) Q2 2019 net loss of SAR 243.7 million came below Aljazira Capital and market consensus loss estimates of SAR 142.1 million and 85.6 million, respectively.

The weak quarter-on-quarter (QoQ) bottom line is mainly attributed to lower average prices of products, higher cost of goods sold (COGS), higher tax expense, higher finance charges and a SAR 56 million loss from subsidiary SAMAPCO, the report said.

Meanwhile, the firm posted strong sales for the quarters at SAR 4.3 billion, beating the expectations of SAR 4.113 billion due to improved phosphates production and sales. 

Phosphate sales volumes rose 14.8 percent QoQ hitting a record high of 1.26 million tons. Ammonia sales fell 12.1 QoQ for the quarter. Aluminum sales increased 15.9 percent QoQ to 146,000 tons, along with a 9 percent QoQ rise in gold volumes driven by improved production in Ad Duwayhi mine.

Gross margin compressed to 11.98 percent in Q2 from 13.41 percent in the previous quarter. 

Gross profit stood at SAR 515.1 million, missing the estimates of SAR 568 million, and SAR 569 million in Q1 2019, due to an inventory write-down of SAR 149 million, compared to a reversal of SAR 365 in the previous quarter.

Cost of raw material and utilities dropped 27.8 percent to SAR 1.4 billion in Q2 versus SAR 1.94 billion in Q1.

Looking forward, the firm’s acquisition of an 85 percent stake in African fertilizer distributer Meridian Group is seen to build an efficient distribution channel to other potential markets, and supports Maaden’s 2025 expansion strategy, the earnings report said.

“Commodity prices are expected to remain under pressure amid trade war concerns in the near term; while the current decline in SAIBOR may act as a key upside trigger for Ma’aden due to a heavy leveraged balance sheet,” it added. 

Aljazira Capital recommended a “Neutral” rating on the stock, with a target price of SAR 48.5 per share.