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Yanbu Cement Company posted a 23% rise in net profit for the fourth quarter compared to the same period last year and 7.4% up against the third quarter, though full-year results saw the company slide against 2009.
The cement and clinker maker saw after-tax gains rise to SAR 101 million compared to SAR 82 million last year and SAR 94 million in the previous quarter. Gross profit rose to SAR 111 million and operating profit hit SAR 104 million, up 32.1% and 35.1% respectively against 2009.
But net profits for the 12 months fell from SAR 482 million to SAR 432 million – or 10.4% – as earnings per share fell from SAR 4.59 to SAR 4.11. A fall in order quantity and sales value were attributed to the decline for the year, although an upturn in sales quantity was cited as the reason for the strong fourth quarter, according to the company.
Yanbu Cement Company is one of nine listed cement companies in the Kingdom and one of the biggest distributors of the commodity by market capitalisation, though like many rivals has seen profits erode from an increasingly saturated market. Net profits fell 17% for the first nine months of 2010 against the same period last year, following a 22% fall in net gains for the first half.
Analysts say the criteria for exporting cement – which includes selling one bag domestically for SAR 10 for every bag sold abroad – has removed any incentive for companies to look beyond the country’s borders. Nishit Lakhotia, senior analyst at Securities & Investment Company in Bahrain, has even highlighted to CW the possibility of a consolidation in the Saudi cement industry in the ensuing domestic price war.
However, cement stocks rallied on 9th December to send the commodity’s index to a seven-month high on the back of speculation that restrictions would be relaxed to allow the companies to supply cement to the upcoming construction work in Qatar on the back of the state’s recent successful bid to host the 2022 world cup.
Shares slipped 0.2% yesterday to close at SAR 42.8 but have risen 5.4% since the start of December.
Analysts have recently taken a neutral position on the company, including Sarouk Miah of NCB Capital – who posted the position two days ago, and was ‘overweight’ on Yamamah Saudi Cement Company – and the team at TAIB Securities. Umar Faruqui at Global Investment House in Kuwait recommended an ‘hold’ on 28th November, up from the ‘sell’ advised by Ismail Sadek at Beltone Financial.
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