Earnings decline in Q1

Al Jouf Cement reported another quarter of below par results with earnings declining by about 40% y-o-y to come in at SAR15mn, missing our estimate of SAR17.8mn, however, exceeding consensus estimate of SAR13mn. We believe the company’s weak performance was on account of the declining sales volumes given the stiff competition it faces from competitors in the northern region coupled with the falling demand due to the slowdown in construction activities. We will analyze the financials once the detailed results are published. For now, we reiterate our Neutral rating with an unchanged target price of SAR19.56.

Conclusion: With all profit lines down 28-40% y-o-y this quarter, Al Jouf has experienced consecutive quarters of negative earnings growth. Since labour issues are continuing to plague the cement sector, we do not expect the trend to reverse in the coming quarter. For now, we reiterate our Neutral rating on Al Jouf with a target price of SAR19.56 per share.

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