Saudi cement sector posts 16% annual growth

Saudi cement company shares have seen a dramatic increase in value over the past year.

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The Saudi Arabian cement sector recorded sales growth of 16%, the highest in more than a year and an indicator of confidence in the economy and an increase in appetite for projects in the country.

Domestic cement sales grew to 4.2 million tonnes in April, compared to 3.61 million tonnes in the same period last year, say NCB Capital analysts. Private projects, mainly school and residential, are especially increasing the demand for cement.

"Last year, people were very wary. The last thing they wanted to do was commit money, but now the outlook is looking brighter," said Farouk Miah, an analyst at NCB Capital in Riyadh.

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"There is also a lot of activity for plans to develop the rest of the region, in Mecca, Madina and Jeddah," he adds.

Officials in Riyadh last week allocated 1,953-hectares of land for housing projects in the city. The directives follow King Abdullah decree ordering authorities to build 500,000 low-cost houses in different parts of the kingdom. Demands for housing in the country increased dramatically, the kingdom needs two million homes by 2014 to keep up with growing population that has quadrupled in the last four decades.

Shares of companies in the cement sector have increased this year, up 24% from the same period last year and outperforming the country’s benchmark Tadawul All-Share Index, which is up 2% in the same period. "Saudi Cement, Southern Province Cement and Yamama Cement should benefit from the demand because they are the ones who have the biggest spare capacity, an average of 20 per cent," added Miah.

"Smaller cement companies can’t benefit because they can’t produce much more." Shares of Yamama Cement gained 0.4 per cent to 63.25 riyals, Southern Province cement lost 0.3 per cent to 70.5 riyals, and Saudi Cement was unchanged at 63.75 riyals yesterday.