Q4 2011 review of Saudi cement companies

Q4_2011_Cement_companies_1Southern Cement, Yamamah Cement, Yanbu Cement have announced their Q4 2011 financial reports recently.Southern Cement, Yamamah Cement and Yanbu Cement have announced their Q4 2011 financial reports recently. We have provided a round-up of the results.

Southern Cement

Profit lines for Southern Cement grew 48-52 per cent YoY driven by strong sales volumes, as well as lower costs.

The company has attributed the higher profitability to increased local sales due to increased demand points in the southern region in Q4 2011. Southern had reported a 33.6 per cent YoY rise in sales volumes in Q4 2011 as compared to 15.6 per cent increase for the sector.

The next major catalyst for Southern Cement is its new 1.5mn capacity line expected in mid-2012. However, due to the ongoing uncertainties with regard to fuel supply from Aramco, it is assumed the new line will commence in 2013, six months later than expected.

This is an excellent set of results from Southern Cement, due largely off the back of increased sales volume in Q4 2011. The better than expected demand base in the southern region of KSA, coupled with supply issues at competitor companies in the Western region has aided Southern Cement.

Yamamah Cement

Yamamah Cement's profit for Q4 2011 grew by around 20 per cent YoY driven by higher volumes as well as stable prices.

Most profit lines came in 8-10 per cent above estimate. The company's sales volumes have grown 11.4 per cent YoY in Q4 2011versus 15.6 per cent increase for the sector as a whole.

Gross income grew by 19 per cent YoY to US$56.7mn, with EBIT up 19 per cent YoY to US$52.5mn driven largely by top-line growth. Net income also increased by 20 per cent YoY to US$51mn

All profit lines came in around 10 per cent above our estimate due largely to lower than expected costs per ton. The company announced on October 2011 that a feasibility study to replace five existing lines with a new one was successful and that it would lead to a net increase in capacity of 1.5mn tons per year in 2014.

Yamamah Cement has reported a reasonable set of Q4 2011results with all profit lines up 19-20 per cent YoY and 9-10 per cent higher than our expected numbers. It is believed this was led largely by higher volumes and stable prices.

Yanbu Cement

Yanbu Cement's profit lines for Q4 2011 grew by 36-54 per cent YoY, driven by higher volumes combined with YoY increase in price.

This is the third consecutive quarter in which Yanbu Cement has recorded high double digit net income growth (around 32-54 per cent). Much of this would be due to the strong demand for cement in the western region, as well as some supply issues due to fuel restrictions from Aramco, leading to significantly higher prices.

In October 2011, Yanbu Cement shut production of its first three lines to execute a trial run of its new production line after being denied extra fuel by Saudi Aramco. Loss incurred due to having to shut the lines was put at US$3.7mn, included in the Q4 2011result. Without assurance of fuel for its new line, this could lead to continued supply disruption and elevated prices for Yanbu Cement.

Yanbu Cement sales volumes has grown by 34 per cent YoY in Q4 2011versus the sector which increased by 15.6 per cent. The Q4 2011result came in broadly in line with expected numbers and the expected numbers highlighted by Yanbu cement in December.

Alain Charles Publishing, University House, 11-13 Lower Grosvenor Place, London, SW1W 0EX, UK
T: +44 20 7834 7676, F: +44 20 7973 0076, W: www.alaincharles.com

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