Saudi Arabia: cement firms come under pressure

Saudi Arabia’s cement activities continue to come under pressure as falling sales volume and profitability remain subdued. Companies’ operational performance was impacted due to lower than estimated average realised price on the back of stiff competition, especially in the central region in 2Q16, coupled with the impact of lower fuel subsidy, reports Al Rajhi Capital.

Saudi Cement and Southern Province Cement were the top performers in 2Q16. Saudi Cement revenue was up 11 per cent YoY, while Southern Province’s revenue was still down seven per cent YoY.

Arabian and Yanbu Cement were impacted as the demand situation in the western region remained under pressure. Yanbu’s reported net profit fell 35 per cent YoY. Arabian Cement also needed to import clinker volumes which impacted on its costs. Yamama Cement’s revenue  was down 18 per cent YoY and net profit  slipped 39 per cent YoY.

Overall, construction activities are expected to remain weak for the foreseeable future as the government spending adjusts to low oil prices through spending cuts and delay of unnecessary projects, says Al Rajhi Capital.