Drop in Saudi 2Q earnings expected

Six Saudi cement companies are expected to see a decline in their revenues and profits, by 37.1 to 62.8 per cent in the second quarter of 2017, according to a recent report by Al Rajhi Capital. The companies covered in the report are Arabian Cement, Yamama Cement, Saudi Cement, Qassim Cement, Yanbu Cement and Southern Province Cement.

The sales volume of the Saudi cement sector declined by 17 per cent YoY in the first two months of the second quarter as a result of a continuous slowdown in construction activities as well as the stiff competition, the report indicated.

During April and May 2017, all cement companies reported a decline in sales volume compared to the same period in the year before.

Northern Cement and Hail Cement witnessed the biggest drop by 43 and 42 per cent, respectively.

High level of inventories coupled with oversupply situation across the regions may lead cement companies to continue selling at bigger discounts.

Saudi and Eastern cement are likely to be impacted by halting cement exports to Bahrain.

"Based on our estimates, the revenue of companies under our coverage is expected to drop by 33 per cent YoY, whereas earnings are likely to fall by 48 per cent on yearly basis,” the research firm said.

"Moving forward, we do not see signs of any significant turnaround for the construction sector in the short term and expect limited demand from mega projects that are nearing completion. Thus, we do not expect to see a recovery in the sector soon,” the report added. (Source: Mubasher Info)