01 September 2020
The earnings of Saudi Arabia’s cement sector reached SR75 million ($20 million) during the second quarter (Q2) of the year, marking a year-on-year (y-o-y) decline of 19 per cent. However, this was higher than the analysts expectations of SR57 million and consensus estimate of SR67 million, a report said.
The beating of estimate was mostly due to a 34 per cent rise in cement volume in June 2020, which could be because of pre-VAT hike buying, said the report released by Al Rajhi Capital, a leading financial services provider in the kingdom.
The y-o-y decline in earnings is primarily due to a decrease in sales, a surge in selling and distribution expenses, an increase in zakat, and a drop in associate income, partially supported by a reduction in general and administrative expenses and finance cost.
Al Rajhi Capital reported revenue of SR298 million, a decline of 12 per cent y-o-y, mainly due to 14.5 per cent y-o-y drop in volume, partially backed by a three per cent increase in price to SR255 per cent ton as compared to SR251 per ton in Q1 2020 and SR248 per ton in Q2 2019.
The Eastern Province is the only region that witnessed a y-o-y decline in volume during the quarter. This may be due to slow construction activities.
“Going forward, we believe that the cement demand in the Eastern region would be under a little pressure; though a gradual pick-up in demand is expected mainly due to the rise in mortgages, which grew by 85 per cent y-o-y in Saudi Arabia during Q2, and resuming of the construction activities of the other infrastructure projects would also bring demand back in the region,” Al Rajhi Capital said in the report. “
Cement prices are expected to be at the current levels for the second half of the year.