Yanbu Cement Co has signed a one-year agreement to export 1Mt of clinker and 0.5Mt of cement as of April 2018. The company added that the deal is expected to boost company's revenues by SAR100m (US$26.6m) during FY18.
 
Analysts EFG Hermes estimates that the cement producer will sell cement at SAR140/t (a discount to prevailing 4Q17 price it had reported but substantiated given large quantities) and clinker at SAR65/t (which is close to its cost of SAR60/t). EFG Hermes assume the total agreement is worth SAR125m.
 
EFG Hermes expects the capacity utilisation level of Yanbu will increase to 81 per cent in 2017 from 75 per cent the previous year. Although profit margins are expected to be lower, given the highly-competitive pricing, the deal is still forecast to affect 2018 earnings positively by approximately 10 per cent.
 
The implied low pricing of the clinker/cement suggests that the company's goals were to unlock some working capital and reduce inventories (which were 4.02Mt in February 2018) rather than to maximise profitability. Another positive to this, according to EFG Hermes, is that it will provide some relief to the western region, given cut-throat competition and could help boost the cement price, albeit marginally.