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Yanbu Cement Co.

Source: BMG

Slowing down

• Yanbu Cement reported FY09 results for the period ending December 2009. Revenues came in at SAR943.2 million in FY09 versus SAR1,093.5 million in FY08, declining by 13.7% y-o-y

• The company reported an EBITDA margin of 61.9% in FY09 versus 60.3% in FY08. Despite a 4.5% decrease in the average annual price of cement in 2009, the company was able to display operational efficiency, which we believe is due to the increased production of portland pozzalan cement versus portland grey cement

• Yanbu Cement recorded a net income of SAR482.1 million in FY09 compared to SAR559.7 million in FY08, down by 13.9% y-o-y

• Yanbu Cement approved a plan to pay a dividend of SAR3.00 per share, which represents a dividend yield of 6.3%

• The company arranged a loan of SAR300 million from the Saudi Industrial Development Fund to partially finance its expansion project, which is expected to commence operations by 2012. This This comes as no surprise as we had already expected Yanbu Cement to take on more debt to finance its SAR1.7 billion production facility, which should increase total capacity to 8.6 million tpa by 2012

• Despite our expectations for strong cement demand within the western region of Saudi Arabia, we still maintain our “Sell” recommendation, largely owning to the fact that Yanbu’s 2009 sales volumes in 2009 declined from 2008’s by 9.3% to amount to 3.9 million tonnes. Taking into account that Yanbu Cement halted its operations during 2Q2008, due to maintenance activities, this provides further evidence of how poor sales were in 2009 (since it couldn’t exceed 2008’s sales volumes )

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