Saudi Cement to buy 40% stake in Kuwait venture

Saudi Cement has gained from increasing domestic demand.

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Saudi Cement Company is to buy a 40% stake in a new cement company in Kuwait, an investment worth KD 800,000 ($2.9m).

Saudi’s biggest cement supplier by volume said the company has signed a Memorandum of Understanding yesterday with an undisclosed partner for the new company, Global Cement Company, according to a note to the stock exchange in Riyadh.

The authorised capital of the company will be up to 100m shares at 100 Kuwaiti fils per share, with the paid-up capital of KD 2m. There are 1,000 fils per Kuwaiti dinar.

Saudi Cement Company is currently profiting from the boom in construction activity in Saudi Arabia that has boosted its bottom line. Net profit for the last quarter rose 39% to SAR 195m ($52m), up from SAR 140m ($37.33m) last year, as sales increased 18.4% year-on-year.

Nine-month profit for the year rose more than a fifth to SAR 619.9m ($165.3m). Increasing demand and higher efficiency due to the replacement of old lines were cited as reasons for the increase.

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“The company has posted better than expected results in the last three quarters due to higher than expected efficiency savings and cement dispatches,” Global Investment House, the Kuwaiti bank, wrote in a report last month. The bank underestimated the company’s third quarter profits by 14%.

“The new production lines that came on-line in April 2009 had an apparent effect on cost of sales per tonne .... These efficiency gains have pushed up gross margins to 57.9% in 23Q11 compared to 50.1% in 3Q10.”

But a ban on exports - except where companies have a license and accept selling restrictions of SAR 10 per bag - has restricted companies to invest in counterparts overseas to develop new lines of income.

Saudi Cement shares closed up 0.82% to SAR 61.5 yesterday.