Saudi Cement’s Q3 income beats estimates on high sales volumes: NCBC

Saudi Cement Co.’s net income declined 13.7 percent year-on-year (YoY) to SAR 75 million in the third quarter (Q3) of 2018, beating NCB Capital (NCBC) and market expectations of  SAR 44 million and SAR 54 million respectively.

“The deviation in earnings is attributed to higher than expected sales volume and margins. Sales volumes increased mainly as a result of cement and clinker exports,” the brokerage firm said in the earnings review.

Total local and export sales of cement and clinker of Saudi Cement stood at 1.33 million tons in Q3 18 (+24.1 percent YoY). This is in-line with NCBC’s estimates of 1.29 million tons.

Gross margins expanded 101 bps YoY to 47.2 percent in Q3 2018 and were significantly higher than the NCBC’s estimates of 33.7 percent due to cost efficiencies and a higher than expected sale of clinker.

NCBC maintained a "neutral" rating on Saudi Cement, setting a price target of SAR 54.5.

“We believe the ongoing weakness in the construction sector is a key risk. However, considering the export sales in Q3 2018, any further export contracts will be a positive catalyst for the stock in the near term,” the report stated.