Mixed results for Yanbu and Yamama, Saudi Arabia

Mixed results for Yanbu and Yamama, Saudi Arabia
Published: 11 April 2011

Two leading Saudi Arabian cement producers, Yanbu Cement and Yamama Cement, have posted mixed first-quarter 2011 results.

Yanbu Cement reported that its 1Q11 profit declined to SAR101m (US$27m), down 17.9 per cent YoY. Gross profit fell 13.3 per cent to SAR111m and operating profit decreased 14.8% YoY to SAR104m.

Analysts at Global Investment House (GIH) note that Yanbu’s performance continues to be held back by old, inefficient lines as cement dispatches declined by 2.2% YoY to 607,000t in Jan-Feb 2011 period. Yanbu cited a fall in sales and annual maintenance of Kiln No. 4 as the reason behind the decline. Furthermore, increased competition in the western region due to the cement export ban and increases in cement capacity have taken their toll on the company, GIH adds. However, the start-up of a new production line, expected to come on-stream in 2H11, could serve as a catalyst for an improved performance going forward.

Yamama Cement, meanwhile, saw its first-quarter net profit increase nine per cent YoY and 12 per cent QoQ to SAR180m. The company’s gross profit and operating profit were also up nine per cent each to SAR196m and SAR184m, respectively. 

GIH noted that these cement results exceeded its estimates by 7.3%, stating that it was a good performance considering the fact that Yamama’s cement dispatches have declined by 4.7% YoY to 957,000t in the Jan-Feb 2011 period. The company cited operational and marketing efficiency as the main reason behind increased profitability. Yamama’s location close to demand centres in the central region gives it the ability to charge premium prices which has helped to offset a decline in dispatches. In addition, Yamama cement has the second lowest cost structure after Qassim cement compared to the Saudi cement companies under GIH coverage due to its integrated plant and captive power supply. The company seems to have further leveraged its cost advantage.