Yamama Cement posts lowest Q3 profit, says NCBC

Yamama Cement’s Q3 2017 net profit of SAR 29.1 million— the lowest third-quarter income on record—came in line with NCB Capital’s forecast of SAR 28.5 million but topped consensus estimates of SAR 23.1 million, due to a rise in other income.

“We believe the YoY weakness came from 1) a decline in sales volumes by 16.7 percent YoY, 2) lower selling prices (-16.6 percent YoY) and 3) weak gross margins of 25.6 percent vs 42.0 percent in Q316,” NCB Capital said in an earnings review.

The cement producer’s sequential revenue hit SAR 164 million, missing the brokerage firm’s estimate of SAR 181 million by 9.2 percent.

Sales volumes which stood at 0.93 million also matched the brokerage firm’s estimate of 1 million tons despite dropping by 16.7 percent YoY.

Average selling price of SAR 176 a ton were in line with NCB Capital’s forecast of SAR 177 a ton.

“We believe lower prices came as a result of the slowdown in the construction sector and increased competition, specifically from smaller players in the central region,” the brokerage firm added.

Yamama’s gross margins fell to 25.6 percent in Q3 from 42 percent in the same period last year. Average gross margins are seen rising to 32.8 percent until 2021.

Key downsides for the stock are financial obligations due to the plant relocation and lower selling prices.

NCBC added that it affirmed its “neutral” rating for the stock, keeping its price target unchanged at SAR 20.30.