Saudi Cement has reported a net profit of SR92 million ($24.52 million) in the second quarter of 2019, an increase of 59 per cent compared to SR58 million ($15.46 million) during Q2 of 2018.

The company missed the estimate of SR105 million ($27.99 million) and consensus estimate of SR96 million ($25.59 million), said a statement from Al Rajhi Capital - one of the largest asset managers in Saudi Arabia and a leading regional investment firm.

The miss was mainly due to higher production and operating costs, which were higher than usual run-rate. On the topline, sales have grew by 38 per cent year-on-year (y-o-y) mainly owing to higher selling prices (25 per cent y-o-y), followed by higher domestic sales volumes (+10 per cent y-o-y) as well as exports, it said.
    
The company increased its market share significantly to 12.8 per cent (Q2 18: 10.9 per cent, Q1 19: 11.6 per cent).

Exports also increased by 11 per cent y-o-y but contribute to less than 20 per cent of total sales, it added.

Going forward, Al Rajhi Capital expects overall sector demand to continue declining but only gradually while exports will partially compensate this decline. Post Q2 earnings, revise the firm’s estimates, reflecting higher sales volume (largely on exports) and revised cement prices. Thus, it revised the TP to SR59/sh. (earlier SR55/sh.).

Although, the stock offers an attractive dividend yield of 4.4 per cent, Al Rajhi Capital believes the upside is capped as the stock has rallied 5o per cent YTD. It remains underweight on the stock. Despite higher growth, even at our 2021 EPS, the company trades at around 15x P/E.

Q2 results: The revenue increased 38 per cent y-o-y to SR339 million ($90.37 million) (in-line with its estimate of SR336 million), owing to 25 per cent y-o-y increase in prices and higher export sales volume of 11 per cent y-o-y.

Domestic cement sales volume also increased 10 per cent y-o-y. Gross profit grew to SR140 million ($37.32 million) (+46 per cent y-o-y, -22 per cent q-o-q) on the back of higher realised prices, implying gross margin expansion to 41 per cent (Q2 2018:39 per cent). Operating costs have increased significantly by 27 per cent y-o-y mainly due to higher exportation and transportation costs. – TradeArabia News Service