Saudi Ceramic’s Q3 loss ‘negative surprise’, says Riyad Cap

Saudi Ceramic Co.’s (SCC) Q3 2017 net loss of SAR 39 million came as a “negative surprise”, compared to Riyad Capital’s estimate of SAR 4 million loss and street’s of SAR 1 million, the brokerage firm said in an earnings review on Monday.

“We reiterate such subdued trends coincide with the tough trends in the sector, a close comparable is the weakness in cement industry, reported below par earnings,” Riyad Capital added.

Another negative surprise was the company’s operating loss of SAR 27 million for the same period, against a profit estimate of SAR 6 million, due to a continuous rise in selling costs, lower sales volumes and gross profit margins.

Excluding one-off times, SCC incurred the fourth operating loss since Q3 2016. 

The ceramic producer’s revenue of SAR 224 million in the third quarter, missed Riyad Capital’s expectations of SAR 254 million.

SCC’s dominates between 18 percent and 20 percent of the Saudi tiles market, compared to nearly 50 percent-60 percent for importers.

“The low demand for tiles in other GCC-ex KSA markets has also resulted in higher exports from neighboring markets; RAK Ceramics in UAE, Anwar Ceramics in Oman are some of the beneficiaries due to its higher exports to KSA,” the brokerage firm said.

Gross profit, which dropped 54 percent YoY to SAR 25 million in Q3, fell short of estimate of SAR 64 million.

Gross margins stood at 11 percent, down from 24 percent in Q3 2016 and Q2 2017 each.

Riyad Capital added that it remained “neutral” on SCC, but revised down the stock’s target price to SAR 20 from SAR 24, expecting trough earnings trends amid sharp topline decline.