Yamama Cement's Q2 below forecasts, says NCB Cap

Yamama Cement Co. posted weak set of results for Q2 2017, with net profit of SAR 12 million – the lowest on record – missing NCB Capital and consensus’ estimates of SAR 51 million and SAR 58 million, respectively, the brokerage firm said in an earnings review.

"We believe the weakness came from 1) lower sales quantities due to the slowdown in the construction sector, 2) weak margins due to the discounts offered and 3) lower than expected investment income,” NCB Capital added.

The second-quarter sales volumes of SAR 1.20 million tons matched the brokerage firm's forecast of 1.26 million tons.

Discounts amid a slowdown in the construction sector along with fierce competition led to an average selling price of SAR 162 a ton, which fell short of NCB Capital’s forecast of SAR 177 a ton.  

"Moreover, we believe the discounts by Yamama Cement were also triggered by its financial obligations due to relocating its current plant,” the brokerage firm added.

Gross profit margins fell to the lowest level on record of 16.9 percent in Q2 2017, from 40.3 percent in the second quarter of 2016.

Yamama's gross margins and profit were hurt by a revised support on fuel and energy prices along with steep discounts.

NCBC added that it maintained a “neutral” rating on the stock, with the price target unchanged at SAR 20.30.