Najran Cement profit decline due to lower selling prices; demand, prices may rebound in H2 2023: CEO

Abdul Salam bin Abdullah Al-Dreeby, CEO of Najran Cement Co.

Abdulsalam Aldraibi, CEO of Najran Cement Co., said last year’s profit decline was due to the decrease in selling prices, highlighting the increase in export sales despite the drop in prices.

The cement producer saw sales growth of about 2% in terms of volume. Meanwhile, net and average selling prices shed 10% year-on-year (YoY) in 2022, Aldraibi said in an interview with Al-Arabiya TV.

According to the CEO, market fundamentals and demand continue to be strong and still at healthy levels. Total sales, both domestic and exports, currently represent 83% of the Saudi cement sector’s market cap.

As for the reason for lower selling prices amid the mega government projects undertaken in the Kingdom, Aldraibi stressed that the fierce market competition put pressure on prices. The related impact is temporary, he added, noting that increased demand during the coming period may change the fundamentals that affect prices significantly.

Aldraibi also indicated that demand inched lower by the end of 2022 due to high interest rates, which forced several real estate developers to call off some of their projects, thus weighing on demand.

He pointed out that the Saudi cement sector witnessed lower sales in December 2022 and January 2023 compared to November 2022, mainly due to the rise in interest rates.

The CEO expected these downturns to be temporary, continuing through H1 2023. He explained that sales prices may remain flat or fall, meaning that prices will continue at the same current levels.

He also projected an uptick in demand and average selling prices in the second half of this year on the launch of key projects in the Kingdom.

Cost of inputs and freight shipping rates rose slightly in 2022. Najran Cement aimed to slash costs by 5-8% in 2022 — a target that was unfeasible as costs stabilized, despite higher production efficiency.

Furthermore, several production inputs rose due to inflation, including the increase in freight rates and the lack of supply of some materials, according to the official.

The CEO also pointed out that Najran Cement mainly exports to Yemen, indicating that export sales represent 10% of the company's total sales.

According to Argaam's data, Najran Cement's profit fell 31% to SAR 113.8 million in 2022, compared to SAR 165.6 million. Q4 2022 profit amounted to SAR 49.3 million.