SAFCO’s Q2 exceeds estimates on higher sales volumes, says Riyad Cap

Saudi Arabian Fertilizer Company (SAFCO) has reported net income of SAR 410 million in Q2 2018, beating Riyad Capital’s and market expectations of SAR 296 million and SAR 286 million respectively, Riyad Capital said in a report.

Q2 2018 earnings were backed by higher sales volume and urea prices as revenue climbed to SAR 950 million. An increase in dividend income from investments and the absence of restructuring costs also positively impacted earnings this quarter.

“We maintain our Buy stance and our target price of SAR 74.00”, Riyad Cap said.

Revenue stood at SAR 950 million, increasing 40 percent YoY and 17 percent QoQ despite a 16-day scheduled shutdown for the company’s plants.

The revenue rise on a YoY basis was driven by an increase in sales quantities and average selling prices of urea.

In addition, the company incurred an extraordinary expense last quarter relating to organization restructuring.

The restructure is intended to meet the company’s future challenges and support its strategy, as stated by company management.

“We are optimistic on Urea prices staying elevated throughout 2018 and the company’s operating efficiencies to persist”, Riyad Cap noted.