Yamama Cement Q4 beats estimates on higher sales prices, says Al Rajhi Cap

Yamama Cement Co.’s net profit of SAR 7 million has beaten Al Rajhi Capital and consensus estimates, the research firm said in an earnings review.

“While sales volume increased by around 20 percent year-on-year (YoY), in line with our expectation, average cement sales prices increased around 60 percent quarter-on-quarter (QoQ) in Q4, which was above our expectation, leading to earnings beat,” the report said.

Revenue stood at SAR 160 million in Q4, above the Al Rajhi Capital estimate of SAR 126 million and consensus estimate of SAR 139.7 million, primarily due to higher-than-expected average cement sales prices.

In Q4, the company sold 1.035 million tons of cement (down 6.8 percent QoQ) in-line with expectations.

Meanwhile, the company’s market share dropped to 9 percent in Q4 from 12 percent in Q3, due to its pricing preference over sales volume amid challenging market conditions.

Gross margin of 20.8 percent was also above the estimates, the report said.

As of Jan 2019, Yamama Cement has 5.3 million tons of inventory, which represents 133 percent of its last 12 month sales.

“We believe that the company might witness few challenges in the near-term, given the relocation of facility, high capex requirement amid higher leverage position. However, the long-term outlook remains positive, given the improvement in cement prices in the Kingdom,” Al Rajhi Capital said.

The firm revised its rating on the stock upwards to “Neutral” from underweight, and raised the target price to SAR 14 per share.