Export ban bites into Saudi cement firms Q3 profits

Export ban bites into Saudi cement firms Q3 profits
Published: 23 October 2008

Saudi Arabia’s largest cement firm by market value on Wednesday blamed a near-25 per cent in third-quarter profit on an export ban amid signs that a construction slowdown is taking its toll on local cement makers.

Southern Province Cement Co made SAR149m in (US$39.73m) the three months to Sept. 30, down from SAR198m in the year-earlier period, it said in a statement on the bourse website.

"The decline is due ... to a drop in sales as a result of halt in exports and an increase in costs due to maintenance works," the firm said.

The firm said the company’s sales rose in both the first and second quarters.

The government slapped in early June a ban on exports of cement to alleviate supply bottlnecks amid a surge in demand both domestically and from neighbouring countries.

Saudi cement firms exported 3.5Mt in 2007 which accounted for 12 per cent of the total cement sales, BMG Financial Advisors said.

Before Southern Cement, all of the five listed Saudi cement companies that have announced their third-quarter earnings posted declines of between 26.6 percent for Qassim Cement and 58 per cent for Tabuk Cement Co.

Qassim Cement attributed the drop to the government export ban, new capacities and to lower activity during the Muslim fasting month Ramadan, which coincided this year with September.

In addition to the export ban, Eastern Cement Co. cited lower demand after third-quarter earnings fell 53 per cent.

"The ban forced prices down," said John Sfakianakis, chief economist at SABB bank .

Prices of cement stocks fell by between at least a third since the ban export measure was announced.

Cement output capacities are expected to double to 60Mt within the next three years as existing companies expand and new producers enter the market.