Southern Province expects 28% rise in Q2 profits

Huge construction plans have bolstered cement firms in Saudi.

RELATED ARTICLES: Southern Province Q1 net up 19% on higher demand | Global cement consumption up 9.9% last year | Saudi cement sector posts 16% annual growth

Southern Province Cement Company said it expects net profits for the second quarter to rise 28% and half-year results to rise 23% as local demand for the material boosts growth.

The Abha company said it is likely to see after-tax returns of $63.19m (SAR 237m) for the last three months, up from $49.33m (SAR185m) from the previous year, on the back of a 29.%% rise in gross profits – up to $66.66m (SAR 250m) from $51.46m (SAR 193m). Operating profits for the period are likely to reach $63.46m (SAR 238m) against $48.79m (SAR 183m).

These results improve on the $60m (SAR 225.8m) posted for the first quarter of this year.

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For the six months, the company said it would see profits rise from $99.99m (SAR 375m) to $123.46m (SAR 463m), spurred by 23% rises in gross and operating profits. Earnings per share for the six months – a key indicator of company health – are to rise to SAR 3.31 from SAR 2.68.

“The reason for the rise in net profit over the same period last year was due to the increase in the local sales because of the high demand in the local market of the company,” it told investors in a routine notification.

Cement companies in Saudi are seeing strong sales on the back of a multi-billion riyal building boom in the biggest Gulf state that has seen the government invest heavily in new projects across infrastructure, building, housing, utilities, energy and airports. This adds to a burgeoning real estate market driven by the private sector, with GCC developers such as Damac Properties starting tower projects as well as local companies such as Lamar Group and Rafal.

The Tadawul stock exchange’s cement index – an aggregate of the nine listed companies’ stock prices - has risen 21.67% since the start of the year, the highest rising sector this year, followed by transport, at 14.48%.

Despite an increasingly saturated market for cement in the company, analysts say the location of cement companies can greatly affect their selling success.

Southern Province has close proximity to Yemen, traditionally a big buyer of the material from Saudi, while Yamamah Saudi has seen strong recent sales from its positioning in the construction-heavy Riyadh province.

Southern Province shares fell 1.02% yesterday to SAR 72.25.