Positive outlook for Saudi cement industry
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Since our Dubai property market update went to press in July 2011 we have been through what is traditionally the quiet time of the year for the UAE, further enhanced this year by the coming together of the traditional leave month of August and Ramadan.
Throughout the last quarter, Bahrain has continued a fragile recovery towards political stability after the period of anti-government hostilities witnessed in the first half of the year.
Quarter 3 is traditionally the quiet time of the year for the UAE, further enhanced this year by the coming together of the traditional leave month of August and the Holy month of Ramadan.
According to a report by NCB Capital, Saudi Arabia’s largest investment lender, outlook for the Kingdom’s cement sector will remain strong for the remainder of 2011 with good demand growth and stable prices.
High dividends remain a key positive of the sector, with expected yields for 2011 around the 6-7 per cent, according to the report. NCB has affirmed Yamamah Cement’s price target of SR72.5 and ‘overweight’ rating, and said the company’s low cost base adds to its competitive strength.
Additionally, with its location in Riyadh, the company is ideally positioned to benefit from the 40 per cent of the country’s total cement demand expected in the central region.
Growth in the cement sector was strong during 2Q11, with the revenue and net income of the nine listed companies climbing 23 per cent and 21 per cent year-on-year, mainly driven by a combination of strong sales volume growth of 15 per cent for the listed companies and a 6 per cent increase in cement prices.
The revenues of the nine listed cement companies grew by 23 per cent Y-o-Y in the second quarter of the year to SR2.63 billion, with Arabian Cement reporting the strongest growth from the major listed companies at 56 per cent Y-o-Y and Eastern cement reporting the weakest with revenues declining by 7 per cent Y-o-Y, said Farouk Miah, acting head of equity research at NCB Capital.
Total sales volume reported a 13 per cent Y-o-Y growth in 2Q11 to 13,559 million tonnes. The total sales volume for the nine listed stock increased by 15 per cent Y-o-Y to 10,757 million tonnes, while for the four private cement companies volumes increased by 5 per cent to 2,802 million tonnes in the second quarter of 2011.
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