Yanbu Cement’s Q2 profit at record low, says NCB Cap

Yanbu Cement’s second quarter net profit of SAR 80 million came in lower than NCB Capital’s and the consensus estimates of SAR 96.7 million and SAR 84.6 million respectively.

This, according to NCB Capital, is the company’s lowest income on record.

These results are 49.5 percent lower year-on-year (YoY) and 35.6 percent below quarter-on-quarter (QoQ), NCB Capital said, due to a decline in sales quantities and selling prices.

Sales had decreased by 17 percent YoY, while selling prices dropped 25.5 percent YoY as a result of high competition.

Average selling prices stood at SAR 177 per ton versus NCBC’s estimates of SAR 193/ton. “We believe these discounts came as a result of the slowdown in the construction sector and increased competition. Moreover, we believe the discounts by Yanbu Cement were also triggered by the limited export potential as a result of the high export tariff.”

While there was an increase in other income from SAR 4.2 million in 2Q 16 to SAR 12 million in 2Q 17, the weak results were further exacerbated by 38.8 percent lower gross margins, compared to 48.5 percent in last year’s second quarter.

NCB Capital is “neutral” on the company with a target price (TP) of SAR 40.8. The company’s key risks are lower prices due to limited export potentials and high tariffs.