Saudi Cement’s Q2 2019 net profit of SAR 92 million missed NCBC and consensus estimates of SAR 101 million and SAR 104 million, respectively, the research firm said in an earnings report.
“With sales coming 8 percent higher than expected, the variance in earnings came from a higher than expected cost per ton potentially due to an increased production of oil-well cement,” NCBC said.
Sales increased 37.8 percent year-on-year (YoY) to SAR 339 million in the second quarter, higher than the expectation of SAR 314 million mainly due to the change in product mix, the report said.
Higher priced oil-well cement resulted in a 25 percent YoY increase in blended selling price to SAR 218 per ton, versus a forecast of SAR 205 per ton and SAR 174 per ton in Q2 2018.
Saudi Cement total sales volumes including exports rose 10 percent YoY to 1.56 million tons (as estimated) in Q2 2019 on higher demand for oil-well cement. The firm outperformed the industry’s 0.4 percent YoY increase in volumes, due to a 9.6 percent YoY hike in sales volumes versus the industry’s 7.2 percent YoY drop.
Gross margins expanded by 232 basis points (bps) YoY to 41.4 percent on higher selling prices, below the estimates of 46.3 percent and Q1 levels of 46.4 percent.
Cost of production of SAR 218 per ton has beaten the forecast of SAR 205 per ton. Opex to sales came in-line with expectations at 12 percent in Q2.
NCB Capital recommended an “underweight” rating on the stock, with a target price of SAR 58.3 per share.
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