Saudi Arabia - Riyadh-based Yamama Cement Company (YSC) has seen its second quarter gross profit rise by 5.0% y-o-y, while its operating profit increased by 0.8% y-o-y.

According to Al Rajhi Capital Research, YSC registered a revenue of SR209 million ($55.65 million), a y-o-y increase of 3.3% and was higher than Al Rajhi’s estimate of SR197 million.

Increase in sales was attributed to a robust 55.9% y-o-y increase in cement volume, though the growth was moderated by a fall in average cement realisation. Higher revenue and the resultant improvement in operating leverage aided profitability, as gross margins improved to 48.1% for Q2 2022, compared to 47.4% a year back.

Operating expenses

However, profitability was moderated by a 27.0% y-o-y increase in operating expenses. For Q2 2022, cement volume of YSC increased by 55.9% y-o-y, better than the industry, which on an average fell by 6.4%, and the performance of the Central region, which registered a fall of 1.2%.

The strong growth in volumes of the company has come on the back of it improving its market share from 10% in 2021 to 13% for M6 2022. Going forward, Al Rajhi expects the company to maintain its market share at these levels.

It also expects the construction sector performance to improve, aided by stable mortgage offtake and favourable movement of construction material prices, which have started to fall. It is also expected that the average cement realisations of YSC to have improved in Q2 2022, compared to Q1 2022, though Al Rajhi expects the same to be lower compared to previous year levels.

Cash flows to improve

Going forward, Al Rajhi expects the prices to remain stable at the current levels. Aided by these, the cash flow generation of the company will improve, which will be utilised for reducing debt. Overall, Al Rajhi increased its target price to SR30/share from SR28/share, and increase its rating to “Neutral” from “Underweight”.

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