Displaying items by tag: Saudi Cement Co

Saudi Arabia: Data from Yamama Cement shows that national cement production fell by 10.5% year-on-year to 42.1Mt in 2018 from 47.1Mt in 2017. Cement production fell at the majority of local producers with the notable exceptions of Saudi Cement, Southern Cement and others. Clinker production dropped by 3% to 48.3Mt from 49.9Mt. Local deliveries of cement decreased by 13% to 41Mt from 47.1Mt. However, exports of cement rose to 1.1Mt from 0.16Mt and exports of clinker increased to 3.2Mt from no exports in 2017.

Saudi Arabia: Saudi Cement Company has appointed Khalid bin Abdulrahman Al-Rajhi as the chairman of the board, Mohammed bin Abdulkarim Al-Khuraiji as Vice-President of the board and Mohammed bin Ali Al-Qarni as secretary of the council.

Saudi Arabia: Saudi Cement’s sales revenue fell by 5.8% to US$217m in the first nine months of 2018 from US$231m in the same period in 2017. Its net profit after tax decreased by 20% to US$73.5m from US$92.2m. The cement producer has blamed falling sales, rising costs and an increase in Islamic finance charges for its declining profits.

No consolidation has happened yet in the Saudi Arabian cement industry but exports have started to be announced. Yanbu Cement signed an export deal in March 2018 to despatch 1Mt of clinker and 0.5Mt of cement from one year from 1 April 2018. Prior to that, Al Jouf Cement Company started a contract to export 72.000t/yr to Jordan from late February 2018. Earlier still, Bahrain was expected to benefit from a lifting of cement export tariffs at the end of January 2018.

Its early days yet but some of sort of action is starting to happen about the country’s falling cement sales. If export deals are in the early stages of being set following the lifting of the ban, then local movements of cement have intensified. As Al Rajhi Capital reports in its latest market update, that producers have been forced by low sales and high inventory levels to take action. It says that cement companies have started to sell products in different parts of the country than they do normally leading to a ‘price war’. The financial services and analytical company has pinpointed the central region as the key battleground as company market shares have fallen over the last six months as northern producers have moved in.

Graph 1: Cement sales (Mt) by quarter in Saudi Arabia, 2015 to March 2018. Source: Yamama Cement.

Cement sales fell by 15% year-on-year to 11.8Mt in the first quarter of 2018 from 13.7Mt in the same period in 2017. This is the first time in recent years that sales did not rise from the fourth quarter to the following first quarter. Not a good sign. Despite the bad news, a few producers did mange to increases their deliveries in the first quarter, including Saudi Cement, Hail Cement, Umm Al Qura Cement and United Cement.

Bizarrely, into this sales environment, plans for the long delayed Al Baha Cement cement plant project have re-emerged. The project previously has received coverage at various stages over the years. This time it has reportedly gained a licence to set up the company and it hopes to start tendering for the build in the second half of 2018. The investors may want to leave it a little longer given the current state of the Saudi cement industry.

Arabian Cement Company had some choice words for a contractor this week when it blamed it in a bourse statement for a delay for a new mill at its Rabigh plant. The project has been pushed back to the third quarter of 2018 from the fourth quarter of 2017. The second phase of the plan, to build a new clinker production line, has also been placed under review.

The contractor may have given Arabian Cement an excuse to put a question mark over its new line, but the market reality has been stark. Also this week, Saudi Cement Company reported that its net profit had fallen by 51.5% year-on-year, to US$92.3m in the first nine months of 2017 compared to US$190.4m in the previous period. It blamed falling sales.

Graph 1: Cement sales (Mt) by quarter in Saudi Arabia, 2015 to September 2017. Source: Yamama Cement.

As Graph 1 shows, cement sales volumes in Saudi Arabia have been dropping since 2015. Sales fell by 5.3% year-on-year to 10.5Mt in the third quarter of 2017 from 10.9Mt in the same period in 2016. Year to date figures show a worse trend with a drop of 17.4% to 35.2Mt in the first nine months of 2017 compared to 42.7Mt in the same period in 2016. This decline has accelerated compared to a decrease of 5.4% from 45.1Mt in 2015 for the first three quarters.

Analyst Al Rajhi Capital provided some context to this situation in its September 2017 report on the August 2017 sales figures. It reported particularly steep declines in cement sales volumes of over 35% for Northern Cement, Najran cement and Hail Cement for the first eight months of the year. However, some producers - including City, Qassim, Yanbu and Al Safwa - did manage modest gains. Overall though the financial services company did not expect any pickup for the second half of 2017.

Last time this column covered the kingdom’s cement industry in early 2016 it asked when the government was going to relieve the export ban. Cement production was high, inventory was pilling up and infrastructure spending was falling. The ban was subsequently lifted but commentators worried that it would be too restrictive to have much effect due to tariffs and volume restrictions. A steady stream of cement producers has applied for export licences since then, but exports have not alleviated the situation. With inventory remaining high for the producers, current export policy failing to help and the local construction market subdued, it is unlikely that anything is going to change soon for the local cement industry. In fact it may even get worse if the government decides to revise its energy price policy later in 2017 or in early 2018, adding to the input cost burden of the producers.

Talk of market consolidation in this kind of market environment seems inevitable. This is exactly what happened earlier in the month when Jihad Al Rashid, the head of the Saudi National Committee for Cement Companies, said to local press that the local market only needed four large cement producers rather than the 17 companies it has at present. The question at this stage seems to be when, rather than if, will this process start.

Saudi Arabia: Saudi Cement Company has seen its profit drop by 56.9% year-on-year in the third quarter of 2017. Its net profit fell to US$23.2m from US$53.7m in the third quarter of 2017. The profit was 7.5% lower than the second quarter of 2017. Saudi Cement Company attributed the decrease to falling sales, the decline of the firm’s stake in net financial results of associate companies and a fall in other revenues.

During the first nine months of 2017 the company’s net profit was 51.5% down year-on-year, falling to US$92.3m compared to US$190.4m in the first nine months of 2016.

Saudi Arabia: Cement sales have fallen by 19% year-on-year to 22.6Mt/yr in the first five months of 2017. Clinker production decreased by 11.3%, according to a market report by Al Rajhi Capital. Northern Cement and Najran Cement recorded the highest declines in the period at 50% and 43% respectively. The report does not expect demand to pick up in the remainder of 2017. Overall it forecasts a 14% fall in sales volumes to around 47Mt in the year. Saudi Cement, Yamama Cement, Yanbu Cement and Najran Cement hold 50% of the total inventory in the sector at 4.9Mt, 4Mt, 3Mt and 2.8Mt respectively.

Saudi Arabia: Tabuk Cement made a net profit of US$2.3m in the first quarter of 2017 from revenues of US$15.3m. For the same period, Umm Al Qura Cement made a net profit of US$4.5m from revenues of US$13.8m. Saudi Cement made a net profit of US$44m and Yanbu Cement made US$33m in profit from revenues of US$81.9m. Eastern Province Cement made US$13.3m from total sales of US$53.9m.

Saudi Arabia: Halla Waleed Al-Juffali has been appointed as a member of the Board of Directors (independent director) of the Saudi Cement Company. Her appointment is subject to shareholder approval. She replaces Waleed Ahmed Al-Juffali, who resigned with effect from 4 February 2016 due to health reasons.

Halla holds a Bachelor’s degree in Business administration degree, majoring in International Business, from the International University of America in London. She has been a director with Ebrahim Al-Juffali and Brothers and Walid Juaffali & Partners. Halla has previously worked as a business analyst for British, European and Chinese investment markets.

Saudi Arabia: The Saudi Cement Company has decided to temporarily stop producing clinker on one of its production lines and postpone replacing three cement mills due to poor market conditions and a cement export ban. The company will stop its 3500t/day clinker kiln 6 until market conditions improve. The stoppage is not expected to affect the cement producer's financial results as its inventory currently stands at 4Mt. A plan to replace three 360t/hr cement mills with two 440t/hr mills has also been delayed due to market conditions. The upgrade was expected to add 0.6Mt/yr cement grinding capacity to the plant.