Arabian Cement net profit drops 84% in Q4 2016
The drop in revenue is attributed to a sharp fall in average realised price/tonne as well as higher than estimated cost of goods sold.
Saudi-based Arabian Cement Company has reported a 42% year-on-year decrease in revenue for Q4 2016, with net profit falling 84.4%, the lowest since the final quarter of 2013.
According to a report released by the company, the drop in revenue is attributed to a sharp fall in average realised price/tonne as well as higher than estimated cost of goods sold.
The company sold 962,000 tonnes of cement during the fourth quarter, reporting a revenue of $64m (SAR240.1m), compared to an initial estimate of $77m (SAR290m), seen due to lower than expected average realised price per tonne.
Net profit came at around $6.4 (SAR24m) (-84.4% yo-y), below initial estimates of $30m (SAR114m) and a consensus of $31m (SAR116m).
“We believe the company’s weak performance was on account of the drop in sale prices (c24% y-o-y), fall in sales volume by 32% y-o-y, and higher than estimated cost of goods sold,” said the report.
The company said that cost of goods sold increased as a result of imported clinker consumption, causing gross profit margin to decline to 27.4% as compared to 46.3% in Q4 2015.
The report highlighted: “For the coming quarters, we expect the company to continue offering discounts given the stiff competition in the region owing to weak demand.
“Taking into account these recent changes, we maintain our neutral rating with a revised target price of SAR40 per share.”