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Saudi Arabia Cement Sector

Source: NCB Capital

Domestic demand steers performance

Given that cement companies in Saudi Arabia do not explicitly provide pricing / cost details, this quarterly report aims to throw light on price realizations and margins at an industry and company level. Please refer to our KSA Cement Monthly for additional details.

Higher sales of cement in the domestic market and a slight reduction in production cost were the key factors that influenced 2Q-09 sector performance of cement companies in Saudi Arabia. In 2Q-09, cost for a ton of cement averaged SR104 (USD28) compared with a price realization of SR234 (USD62).

Revenues: Total revenue of the KSA cement sector stood at SR2,061mn in 2Q-09, down 6% YoY but up 5.2% QoQ. The revenue growth was largely driven by higher sales of cement in the domestic market – up 20% YoY and 10% QoQ. Total sales, including private company sales and exports, crossed the 10mt-mark for the first time. Sales in the domestic market were up 20% YoY at 9.97mt. (please refer to our cement monthly for further details).

Price realizations and cost of production: Realizations for cement companies in the Kingdom averaged SR234 per ton in 2Q-09 compared to SR262 per ton in 2Q-08 and SR239 per ton in 1Q-09. The average cost of producing a ton of cement was SR104 in the quarter under review, a miniscule change both on YoY and QoQ basis.

Gross profit: The combined gross profit of the cement sector stood at SR1,146mn in 2Q-09; down 11% YoY and up 3.5% QoQ. The highest quarterly gross profit attained by the sector was SR1,303mn in 1Q-08.

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