1. business and industrial
2. chemicals industry
3. adhesives

Saudi Cement Sector
Cement –Industrial
Saudi Arabia
19 May 2015
January 18, 2010
Research Department
Abdullah M. Al-Jarbooa,
Tel +966 11 211 9471, aljarbooaam@alrajhi-capital.com
Key themes
This is our monthly update on Cement production,
volumes and inventory in Saudi Arabia.
What do we think?
Stock
Rating
Price Target
Arabian
Neutral
SAR 81.0
Yamama
Overweight
SAR 60.6
Saudi Cement
Overweight
SAR117.3
Neutral
SAR 97.9
Neutral
SAR 120.0
Qassim
SPCC
Yanbu
Overweight
SAR 83.3
Saudi Cement Monthly
Sales volumes grew at 7.2% y-o-y
According to the latest data released by Yamama Cement, for the month of
April, total cement sales volumes in the Kingdom rose 7.2% y-o-y to 5.7mn tons
(-2.6% m-o-m). The y-o-y rise in sales volumes over the last few months,
suggests a recovery of construction activities in the Kingdom. Cement
production in the Kingdom stood at 5.7mn tons during the same period, up
6.4% y-o-y (-2.6% m-o-m). Total inventory stood at 21.1mn tons, representing
36% of last 12 month sales. Inventory has grown 22.5% y-o-y but declined 1.2%
m-o-m. Among the companies under our coverage, Yanbu and Southern
Province Cement Company (SPCC)’s market shares improved 0.4% and 0.2%
from the previous year to 11.7% and 13.8% respectively. On the other hand,
Saudi Cement Company’s market share declined 1.5% from April 2014 to 12.2%
in 2015. In the following months for 2015, we expect the construction activities
in the Kingdom to revive further on improving labor market conditions and
strong demand. We are Overweight on Yamama, Yanbu and Saudi Cement
companies.
Sales Volume: In April 2015, cement sales volumes in the Kingdom stood at
5.7mn tons (+7.2% y-o-y, -2.6% m-o-m). Najran posted a 46% y-o-y jump in
sales volumes to 0.43mn tons. For the companies under our coverage, Yanbu
posted the strongest jump in sales volumes (+11% y-o-y) to 0.67mn, followed by
SPCC (+9.0% y-o-y) to 0.79 mn tons. On the other hand Saudi Cement and
Arabian Cement witnessed a decline in sales volumes of 4.6% and 0.4%
respectively.
Production: Cement production in the Kingdom rose 6.4% y-o-y in April to
5.7mn tons (-2.6% m-o-m), led by Najran Cement and City Cement, which
witnessed a rise in production volumes by 56% and 30% respectively. For the
companies under our coverage Yanbu’s production rose 12.2% y-o-y to 0.67mn
tons, followed by SPCC (+8.6% y-o-y) to 0.79mn tons. On the other hand,
production volumes of Qassim Cement and Saudi Cement companies slipped
9.1% and 2.6% respectively.
Inventory: Total inventory in the Kingdom stood at 21.1mn tons at the end of
April 2015 (+22.5% y-o-y, -1.2% m-o-m), representing 36% of last 12-month
sales. Yamama Cement posted the highest increase in inventories (+76.4% y-oy), representing 53% of last 12-month sales. Qassim Cement’s inventory grew
62.6% y-o-y, representing 23% of sales, while Saudi Cement’s inventory grew
37.5%, representing 46% of sales. On the other hand, Arabian Cement’s
inventory declined 61.7% y-o-y, which represents only 7.0% of last 12 month
sales.
Valuation: In April 2015, the Saudi cement index advanced 4.8% in comparison
to the TASI which rose 12.0% for the same period. The cement index is currently
trading at an aggregate 2015PE of 14.8x below the Tadawul PE of 20.4x (Source:
Bloomberg).
Disclosures Please refer to the important disclosures at the back of this report.
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Saudi Cement Sector
Cement –Industrial
19 May 2015
Figure 1 Cement production volume (absolute, y-o-y, m-o-m)
y-o-y growth (%)
Apr-15
Mar-15
Jan-15
Feb-15
Dec-14
Nov-14
Oct-14
Sep-14
Aug-14
Jul-14
Jun-14
May-14
Jul-13
Mar-13
Production volume (thousand tons)
Apr-14
-60%
Mar-14
0
Feb-14
-40%
Jan-14
1,000
Dec-13
-20%
Nov-13
2,000
Oct-13
0%
Sep-13
3,000
Aug-13
20%
Jun-13
4,000
May-13
40%
Apr-13
5,000
Feb-13
60%
Jan-13
6,000
m-o-m growth (%)
Source: Company data, Al Rajhi Capital
Figure 2 Cement production (y-o-y)
Figure 3 Cement production (m-o-m)
5,700
5,850
5,600
5,800
5,500
5,750
5,400
5,700
5,300
5,650
5,200
5,600
5,100
Title:
Source:
Please fill in the values above to have them entered in your report
5,550
Apr-14
Apr-15
Mar-15
Production (in thousand tons)
Apr-15
Production (in thousand tons)
Source: Company data, Al Rajhi Capital
Source: Company data, Al Rajhi Capital
Figure 4 Cement production (y-o-y)
Figure 5 Cement production (m-o-m)
900
900
800
800
700
700
600
600
500
500
400
400
300
300
200
200
100
100
0
Title:
Source:
Please fill in the values above to have them entered in your report
0
Yamama
Cement
Saudi
Cement
Qassim
Cement
Apr-14
Yanbu
Cement
Arabian
Cement
Southern
Cement
Yamama
Cement
Saudi
Cement
Apr-15
Source: Company data, Al Rajhi Capital
Disclosures Please refer to the important disclosures at the back of this report.
Qassim
Cement
Mar-15
Yanbu
Cement
Arabian
Cement
Southern
Cement
Apr-15
Source: Company data, Al Rajhi Capital
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Saudi Cement Sector
Cement –Industrial
19 May 2015
Figure 6 Cement sales volumes (absolute, y-o-y, m-o-m)
Sales volume (thousand tons)
y-o-y growth (%)
Apr-15
Mar-15
Feb-15
Jan-15
Dec-14
Nov-14
Oct-14
Sep-14
Aug-14
Jul-14
Jun-14
Apr-14
May-14
Mar-14
Feb-14
-60%
Jan-14
0
Dec-13
-40%
Nov-13
1,000
Oct-13
-20%
Sep-13
2,000
Aug-13
0%
Jul-13
3,000
Jun-13
20%
May-13
4,000
Apr-13
40%
Mar-13
5,000
Feb-13
60%
Jan-13
6,000
m-o-m growth (%)
Source: Company data, Al Rajhi Capital
Figure 7 Cement sales volumes (y-o-y)
Figure 8 Cement sales volumes (m-o-m)
5,800
5,900
5,700
5,850
Title:
Source:
Please fill in the values above to have them entered in your report
5,600
5,800
5,500
5,750
5,400
5,700
5,300
5,650
5,200
5,100
5,600
Apr-14
Apr-15
Mar-15
Sales volumes (in thousand tons)
Apr-15
Sales volumes (in thousand tons)
Source: Company data, Al Rajhi Capital
Source: Company data, Al Rajhi Capital
Figure 9 Cement sales volumes (y-o-y)
Figure 10 Cement sales volumes (m-o-m)
900
900
800
800
700
700
600
600
500
500
400
400
300
300
200
200
100
100
0
Title:
Source:
Please fill in the values above to have them entered in your report
0
Yamama
Cement
Saudi
Cement
Qassim
Cement
Apr-14
Yanbu
Cement
Arabian
Cement
Southern
Cement
Yamama
Cement
Saudi
Cement
Apr-15
Source: Company data, Al Rajhi Capital
Disclosures Please refer to the important disclosures at the back of this report.
Qassim
Cement
Mar-15
Yanbu
Cement
Arabian
Cement
Southern
Cement
Apr-15
Source: Company data, Al Rajhi Capital
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Saudi Cement Sector
Cement –Industrial
19 May 2015
Figure 11 Domestic market share (y-o-y)
Figure 12 Domestic market share (m-o-m)
16%
16%
14%
14%
12%
12%
10%
10%
8%
8%
6%
6%
4%
4%
2%
2%
Title:
Source:
Please fill in the values above to have them entered in your report
0%
0%
Yamama
Saudi Cement
Qassim
Apr-14
Yanbu
Arabian
SPCC
Yamama
Saudi Cement
Apr-15
Qassim
Yanbu
Mar-15
Source: Company data, Al Rajhi Capital
Arabian
SPCC
Apr-15
Source: Company data, Al Rajhi Capital
Figure 13 Inventories (absolute, y-o-y, m-o-m)
25,000
250%
200%
20,000
150%
15,000
100%
10,000
50%
5,000
0%
Inventories (thousand tons)
y-o-y growth (%)
Apr-15
Mar-15
Feb-15
Jan-15
Dec-14
Nov-14
Oct-14
Sep-14
Aug-14
Jul-14
Jun-14
May-14
Apr-14
Feb-14
Mar-14
-50%
Jan-14
0
m-o-m growth (%)
Source: Company data, Al Rajhi Capital
Figure 14 Inventories (y-o-y)
Figure 15 Inventories (m-o-m)
25,000
21,400
Title:
Source:
21,350
20,000
21,300
Please fill in the values above to have them entered in your report
21,250
15,000
21,200
21,150
10,000
21,100
21,050
5,000
21,000
0
20,950
Apr-14
Apr-15
Inventories (in thousand tons)
Source: Company data, Al Rajhi Capital
Disclosures Please refer to the important disclosures at the back of this report.
Mar-15
Apr-15
Inventories ( in thousand tons)
Source: Company data, Al Rajhi Capital
4
Saudi Cement Sector
Cement –Industrial
19 May 2015
Figure 16 Inventories (y-o-y)
Figure 17 Inventories (m-o-m)
4000
4000
3500
3500
3000
3000
2500
2500
2000
2000
1500
1500
1000
1000
500
500
0
Title:
Source:
Please fill in the values above to have them entered in your report
0
Yamama
Cement
Saudi
Cement
Qassim
Cement
Apr-14
Yanbu
Cement
Arabian
Cement
Southern
Cement
Yamama
Cement
Saudi
Cement
Apr-15
Qassim
Cement
Mar-15
Yanbu
Cement
Source: Company data, Al Rajhi Capital
Figure 18 Inventory as a % of sales (y-o-y)
Figure 19 Inventory as a % of sales (m-o-m)
60%
50%
50%
40%
40%
30%
30%
20%
20%
10%
10%
0%
Southern
Cement
Apr-15
Source: Company data, Al Rajhi Capital
60%
Arabian
Cement
Title:
Source:
Please fill in the values above to have them entered in your report
0%
Yamama
Saudi
Cement
Qassim
Apr-14
Yanbu
Arabian
SPCC
Yamama
Saudi
Cement
Apr-15
Qassim
Mar-15
Source: Company data, Al Rajhi Capital
Yanbu
Arabian
SPCC
Apr-15
Source: Company data, Al Rajhi Capital
Figure 20 Bank credit to building and construction activity (%) (q-o-q)
7.2%
7.1%
7.0%
6.9%
6.8%
6.7%
6.6%
6.5%
6.4%
Q1 2013
Q1 2014
Q2 2013
Q2 2014
Q3 2013
Q3 2014
Q4 2013
Q4 2014
Q1 2015
Bank credit to building and construction activity (%)
Source: Company data, Al Rajhi Capital
Disclosures Please refer to the important disclosures at the back of this report.
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Saudi Cement Sector
Cement –Industrial
19 May 2015
Figure 21 Saudi cement companies valuation matrix
Companies
Market cap (SAR mn) YTD (% ) P/E (x) '15 EV/EBITDA '15
Dividend
P/BV (x) '15 Yield (% ) '15
ROE (% ) '15
ROA (% ) '15
Arabian Cement
8,000
3.1
12.1
9.0
2.5
6.6
20.2
14.4
Yamama Cement
9,916
2.2
13.2
10.0
2.7
6.3
18.0
16.4
14,742
0.7
13.2
11.7
4.6
7.1
32.6
24.4
8,528
6.3
15.2
12.0
4.3
6.4
27.8
24.3
Yanbu Cement
10,690
10.1
13.3
10.4
3.0
6.2
22.1
17.9
SPCC
14,140
-7.6
13.5
12.4
4.6
6.2
33.6
26.7
Saudi Cement
Qassim Cement
Source: Company data, Al Rajhi Capital
Disclosures Please refer to the important disclosures at the back of this report.
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Saudi Cement Sector
Cement –Industrial
19 May 2015
Disclaimer and additional disclosures for Equity Research
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month time horizon.
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on a 6-9 month time horizon.
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month time horizon.
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Pritish K. Devassy, CFA
Tel: +966 11 2119370
devassyp@alrajhi-capital.com
Al Rajhi Capital
Research Department
Head Office, King Fahad Road
P.O. Box 5561
Riyadh 11432
Kingdom of Saudi Arabia
Email: research@alrajhi-capital.com
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Disclosures Please refer to the important disclosures at the back of this report.
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