City Cement Co.’s Q1 net profit of SAR 37.9 million came in 35.4 percent below Aljazira Capital’s estimate of SAR 58.7 million, due to a higher-than-expected increase in production costs.
“The decline in net income is attributed to lower selling price and higher production cost despite the increase in volumetric sales,” Aljazira Capital said in an earnings review.
Revenue declined 7.2 percent year-on-year (YoY) to SAR 167.3 million, in-line with Aljazira Capital’s forecast of SAR 175.5 million.
Gross margin contracted to 28.1 percent in Q1, from 46.5 percent in the same period last year.
Looking ahead, City Cement’s full-year net profit is expected to fall 37.6 percent YoY to SAR 134.8 million.
Revenue is also projected to see further drops this year, hurt by continued pressure on cement fundamentals.
Gross margin is likely to average 32 percent for the year.
“Aggressively discounted selling prices will have major impact on the company’s profitability,” the brokerage firm added.
Dividend payout would be lowered to SAR 0.50 per share this year, following a cut to SAR 1 per share in 2016.
Aljazira Capital downgraded City Cement to “underweight”, cutting the stock’s target price to SAR 10.20.
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