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Yanbu Cement Company’s (YCC) recently released Q2 results that showed YoY growth on all profit lines stood at around 30 per cent.
However, according to a report by NCB Capital (NCBC), much of this was due to the weak numbers reported in Q2 2010 when net income declined by 25 per cent YoY.
Q2 2011came in at US$42mn, increasing 30 per cent YoY and seven per cent above the NCBC estimate of US$40mn. Q2 2011 was an increase of 43.4 per cent QoQ.
Q2 2011came in at US$40mn, increasing 30 per cent YoY and 7.3 per cent above the NCBC estimate of US$37mn. Q2 2011 was an increase of 44.9 per cent QoQ.
Q2 2011 came in at US$40mn, increasing 32 per cent YoY and 21 per cent above the NCBC estimate of US$33mn. Q2 2011was an increase of 48.4 per cent QoQ.
In summary, Q2 2011 results showed strong YoY growth, but NCBC states that much of this is due to a very weak quarter in Q2 2010 when net income decreased by 25 per cent YoY. The significant miss on net income vs. NCBC estimates is believed to be due to a lack of interest expense which was expected on the debt taken for its new line.
This is only the second quarter in the last eight quarters where YCC has recorded YoY gains in net income. NCBC states that much of this was aided by the increase in cement prices seen in the western region. It is believed that this spike in prices is temporary, although prices for 2011 as a whole should remain stable YoY.
On fundamentals, the outlook for Yanbu Cement is reasonable, especially as it is expected to open its new three million tonnes a year line in Q3 2011.
NCBC is underweight on the stock as it argues that its valuation premium to peers is not justified.