Saudi Arabia’s Yanbu Cement, posted a drop in fourth quarter (Q4) earnings for 2018 on Tuesday, but managed to beat estimates on higher cement prices.

The company’s net profit after zakat and tax for Q4 2018 amounted to 31.2 million Saudi riyals ($9.1 million), compared to 95.9 million riyals in Q4 2017, translating into a 67.5 percent drop year-on-year, but beating an EFG Hermes earnings estimate by more than 60 percent.

Sameer Kattiparambil, an analyst at EFG Hermes based in Muscat, told Zawya by email that the beat to the estimate “was mainly driven by stronger-than-expected cement price realised during the quarter and partly due to a low-cost structure”.

Kattiparambil added that the cement price within the company's main areas of operation has recovered strongly quarter-on-quarter to 160 riyals/tonne (up 36 percent quarter-on-quarter, but down 9 percent year-on-year). This was 19 percent higher than EFG Hermes’ estimate.

“Although we expect 2019 cement prices to pick up from their 2018 levels, we would expect some more volatility in the cement prices over the short term until demand stabilises,” he said.

The company’s shares closed 1.38 percent lower at 28.6 riyals on Tuesday, but have gained 19.17 percent so far this year.

“We currently have a 'Buy' rating on Yanbu Cement because of its multi-region proximity (located in the high-demand Western region, with access to the North-Western region, where megaprojects are announced) and valuation remains reasonable (2020 expected EV/EBITDA of 10.7x), with a sound balance sheet (net debt/EBITDA of 0.4x),” Kattiparambil ended.

(Reporting by Gerard Aoun; Editing by Michael Fahy)

(gerard.aoun@refinitiv.com)

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