Yamama Cement’s Q2 below estimates on lower prices: Al Rajhi Cap

Yamama Cement reported a net loss of SAR 36 million in the second quarter this year, falling below Al Rajhi Capital’s estimate of a SAR 28 million in profit and consensus estimate of SAR 21 million in profit.

“On year-on-year (YoY) basis, the company’s bottom-line was impacted by lower realized selling price, higher tax provisions and higher selling and administrative expenses,” Al Rajhi Capital said in an earnings review on Tuesday.

The company’s revenue declined 42 percent YoY to SAR 112 million due to 30 percent YoY decrease in average realized price and 17 percent YoY decrease in sales quantities, which Al Rajhi Capital said is likely is due to the overall market conditions and the intense competition in the central region.

The financial advisory firm expects selling price volatility to continue in the short term.

Although sales decreased YoY, Yamama Cement managed to increase its market share to 10.3 percent in Q2 from 6.3 percent in Q1.

At the end of June 2018, Yamama held 5.16 million tons of inventory – representing 138 percent of last 12-month sales volume and 14 percent of total inventories in the sector.

“Going forward, we believe that continuing inventory overhang and the low selling price relative to competitors will weigh on the stock,” the brokerage said.

Al Rajhi Capital has changed its rating on Yamama Cement to “underweight” with a target price of SAR 12.5 per share.