City Cement’s Q2 net profit beats estimates on lower cost/ton, says Aljazira Capital

City Cement Co.’s net profit of SAR 9.88 million for the second quarter of 2018 came above Aljazira Capital’s estimates of SAR 7.9 million, but missed the market consensus’ of SAR 13.7 million, the brokerage firm said in an earnings report.

“The deviation from our estimates is attributed to higher than expected gross profit margin, as a result of lower than expected cost/ton,” the report said.

Revenue stood at SAR 70.1 million, a 40.1 percent year-on-year (YoY) drop, missed Aljazira Capital’s estimates of SAR 77.5 million due to lower than expected selling prices.

Price realization is expected to stand at SAR 131.2/ton compared to the estimate of SAR 150.3/ton (Down 10.5 percent YoY).

During fiscal year 2018, Price realization is expected to average at SAR 151.9/ton, compared to SAR 157.1/ton last year.

Gross profit stood at SAR 19.4 million, beating the estimates by 24.4 percent.

Gross margins improved to 27.7 percent in Q2 from 17.7 percent in the same quarter 2017 on lower cost per ton.

Cost per ton likely stands at SAR 94.8 compared to SAR 120.7/ton in Q2-17, the lowest since 2014.

It is expected the cost per ton for 2018 to average at SAR 111.9/ton.

Operating profit came at SAR 12 million, 42.8 percent above estimates.

The company inventory to sales ratio (TTM) stands at 45.2 percent, a better position compared to the sector level of 83.9 percent, the report said.

“The company reduced its dividend payment for FY17 to SAR 0.40/share, we expect the company to maintain its dividend payment for FY18,” it added.

Aljazira Capital recommended a “Neutral” rating on the stock with a target price of SAR 10.3 per share.