Saudi Cement Company (SACCO) reported a rise in its Q2 2019 net profit due to an increase in volume growth. The results are in line with analysts forecasts.

The company’s net profit after zakat and tax amounted to 92.3 million Saudi riyals ($24.61 million) compared to 58 million riyals in Q2 2018, a 59.14 percent increase, in line with EFG Hermes’ estimate.

“Year on year (y-o-y) growth in earnings was led by volume growth and better cement prices, but the sequential decline was due to seasonal impact,” Sameer Kattiparambil, an analyst at EFG Hermes told Zawya.

SACCO’s net profit dropped from 132.4 million riyals in the previous quarter (Q1 2019), a 30.29 percent drop.

“Stability in cement price is the key surprising factor for us, as we were expecting some softness during the low-demand summer months,” Kattiparambil added.

The company’s Q2 2019 sales stood at 338.6 million riyals, compared to 245.7 million riyals in Q2 2018, a 37.81 percent increase.

The reported revenue is 13 percent higher than EFG Hermes’s estimate “on a mix of (a) better-than-expected average selling price of SAR231/tonne and higher-than-estimated local sales volumes of 1.36mn tonnes,” Kattiparambil said.

Clinker export volumes were 34 percent below EFG Hermes’ estimate.

SACCO’s shares were trading 1.09 percent lower at 72.6 riyals by 14:12 GST, but have added 49.54 percent so far since the start of 2019.

EFG Hermes currently has a “Sell” rating on the company “as its valuation seems stretched and the Eastern region does not offer any strong demand catalysts, unlike some of the other regions,” Kattiparambil said.

“Having said that, SACCO is part of the MSCI emerging market standard index, and we expect close to $54mn inflows from second tranche of this inclusion trade in August 2019, which should support the share price in the short term,” he said.

(Reporting by Gerard Aoun; Editing by Seban Scaria)


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