Provisions on Yemen operations weigh on Yamama Cement’s Q4: NCBC

Yamama Cement’s Q4 2017 net income fell 51.3 percent year-on-year (YoY) to SAR 16.9 million, broadly in-line with NCB Capital’s estimate of SAR 18.1 million, but significantly below the consensus estimate of SAR 29.3 million, the research firm said in a report.

“Despite higher selling prices, we believe earnings declined YoY due to lower sales quantities and provisions of SAR 21 million on receivables of an associate company in Yemen,” NCBC said.

The cement firm’s total sales quantity was 0.87 million tons in Q4, in-line with estimates of 0.85 million tons.

Sales came in at SAR 169 million, coming higher than estimates of SAR 144 million. Average selling prices stood at SAR 196/ton, higher than the NCBC estimates of SAR 170/ton.

“We believe these discounts came as a result of the slowdown in the construction sector and increased competition, specifically from smaller players and new entrants”, NCBC added.

Yamama Cement’s ross margins expanded from 30.7 percent in Q4 2016 to 31.9 percent in Q4 2017, higher that NCBC’s estimates of 24.3 percent. The deviation was attributed to the revival in selling prices from Q4-16 (SAR 193/ton) and Q3-17 (SAR 176/ton) levels. 

NCBC is neutral on Yamama Cement with a target price of SAR 20.3.

“Financial obligations due to the plant relocation are a key risk. However, removing the export ban may reduce the pressure on the extent of discounts offered by cement player in the Kingdom,” the report said.