Saudi Arabia’s Al Jouf Cement posted a sharp drop in first quarter (Q1) earnings for 2019, triggering a retreat in the company’s shares on Monday.

The company’s Q1 2019 net profit amounted to 1.5 million Saudi riyals ($0.4 million), compared to 4.1 million riyals in Q1 2018, a 63.41 percent drop, missing EFG Hermes’ estimate of 3 million riyals.

“The miss was mainly due to an elevated cost structure, which offset its (Al Jouf) top-line growth,” Sameer Kattiparambil, an analyst at EFG Hermes told Zawya by email.

Kattiparambil said that cement prices increased 12 percent year-on-year (y-o-y) and were 9 percent higher than EFG Hermes’ estimate, at 163 riyals per ton, but prices were “overshadowed” by an increase in cash costs to 115 riyals per tons, up 36 percent y-o-y and 46 percent higher than the firm's estimate.

Al Jouf’s Q1 2019 revenue rose 14.29 percent to 56.8 million riyals, from 49.7 million riyals in Q1 2018, beating EFG Hermes’ estimate by close to 9 percent.

Kattiparambil said that the higher than expected revenue was “mainly on the back of higher-than-expected cement prices”.

The company’s shares were trading 3.47 percent lower at 7.8 riyals by 12:10 GST on Monday and have added 0.65 percent so far since the start of 2019.

“We currently have (a) Sell rating on Jouf Cement as its trades at a premium to peers (2020 expected EV/EBITDA of close to 14.5x) and as it has a lack of growth catalysts,” Kattiparambil said.

(Reporting by Gerard Aoun; Editing by Michael Fahy)


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