Pressure on Saudi Arabia producers

Pressure on Saudi Arabia producers
Published: 17 June 2010

Saudi cement companies had a dreadful last month, with all eight listed companies losing ground. But they may have further to fall.

The Saudi investment bank NCB Capital sees the stocks as still slightly overvalued and reduced its target price for each of the six companies it covers.

The main reason is a glut of cement in the market and increased competition that will put pressure on the companies’ ability to maintain market share.

For companies that have exposure to Saudi Arabia’s central region, flooding and sandstorms will affect performance as well.

Coming off a difficult first quarter in which net income fell by almost one per cent for the companies, the Saudi cement firms are also on track to post less-than-stellar results for the current quarter.

The bank projects that while revenue should rise slightly, net income will decline by 2.3 per cent.