Cement Dispatches- revive @ 56.4%MoM due to end of Ramadan and recovering demand:

the data released by Yamamah Cement Co, cement dispatches for the month of August-2015 stood at 4.89mn tons, as compared to 4.16mn tons in August-2014, depicting an increase of 56.4%MoM (Riyadh cement excluded) and an increase of 25.7%YoY

Overview: Saudi Arabia’s cement dispatches, in August 2015, witnessed an increase of 56.4%MoM due to of the end of holy month Ramadan ( in June 2015), which usually is accompanied by weak demand due to limited working hours. The YoY growth of 25.7% was attributed to higher construction activity. In contrast, cement consumption during 8M-2015 stood at 40.78MT depicting an increase of 8.6%YoY. We believe the demand is expected to maintain a healthy growth in the medium term due to recovering economic conditions despite of declining oil prices. The governments measures to issue bonds, to finance the fiscal expenditure would cover the expected shortage in the budget. Subsequently, this will allow the government to continue spending on vital infrastructure projects and keep the construction activity on track. Also the expected upcoming activity of residential units construction to meet the housing shortage in Saudi Arabia, will keep the construction activity alive. However, margins are likely to decline in companies which didn’t get the gas allocation for new production lines

On MoM basis, City and Arabian Cement companies showed the most increase in their cement dispatches as they advanced by 76.8% and 73.4% respectively for the month of August-2015. In addition, AlSafwa and Eastern cement companies were the least recovering during the comparison period and showed a modest increase of 21.7% and 31.1% respectively (Riyadh cement excluded). On YoY basis, City and Najran cement companies showed the highest growth of 51.4%YoY and 44.2%YoY respectively.

Clinker inventory levels showed an insignificant increase 0f 2.4%MoM, despite of 18.6%MoM increase in clinker production. This is primarily due to the high increase of cement dispatches of 56.4%MoM for the same period. The most MoM Increase was registered by Arabian Cement Company, which showed an increase of 15.2% due to higher quantities of purchased clinker. However, Northern Cement Company witnessed a decline of 8.0% MoM in its clinker inventory due to a 300% increase in clinker sales MoM .

Market Share: City Cement Company showed an improvement in its market share as it increased from 3.5% in August-2014 to 4.5% in August-2015. Whereas, Arabian Cement Company market share decline to 8.9% in August-2015 as compared to 11.3% in August-2014 due to the new capacity expansions in the industry and higher capacity utilization from other players.

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