Saudi Cement - Interim Financial Results - Company Q1 2018

Transcription

1. Saudi Cement Cement Sector SACCO AB - 3030 .SE May 6, 2018 Saudi Cement Company Recommendation Neutral Fair Value (SAR) 51.00 Price as of May 3, 2018 51.10 Expected Return -0.2% Tadawul Symbol 3030.SE Company Data 52 Week High (SAR) 60.40 52 Week Low (SAR) 37.20 YTD Change 6.8% 3-Month Average Volume (Thousand Shares) 207 Market Cap. (SAR Million) 7,803 Market Cap. (USD Million) 2,081 Outstanding Shares (Million Shares) 153 Khalid Abdulrahman Saleh Al Rajhi 8.02% Public Pension Agency 5.62% General Organization for Social Insurance 5.22% Major Shareholders ( > 5% ) 52-week Stock Price Movement Saudi Cement Tadawul Index 120 110 Q1 2018 Saudi Cement Company announced its Q1 2018 interim results revealing a bottom line of SAR 142.2 million compared to SAR 164.7 million in Q1 2017 slumping 14% YoY, while climbing 32% QoQ from SAR 107.5 million in the previous quarter. This resulted in a net profit margin of 43.0% in Q1 2018 compared with 47.6% in Q1 2017 and 33.7% for the previous quarter. Total revenues amounted to SAR 330.5 million in Q1 2018 compared to SAR 346.4 million in Q1 2017 shrinking 4.6%, while growing 3.7% from SAR 318.5 million in the previous quarter. Furthermore, the company sold 1.45 million tons of cement in Q1 2018 compared to 1.47 million tons in Q1 2017 sliding 1.4% YoY, however soaring 10.4% QoQ from 1.31 million tons in Q4 2017. The YoY decline in first-quarter net profit was triggered by the dip in selling dispatches and the increase in cost of sales per ton, as result of reducing production, in addition to lower share in net results of associated companies and the drop in other income. In comparison with the previous quarter, the jump in net profit was attributed to the growth selling dispatches and the drop in cost of sales per ton driven by increasing production, in addition to lower general and administrative expenses as well as higher share in net results of associated companies. Gross profit concluded Q1 2018 at SAR 169 million versus SAR 191 million in Q1 2017 sliding 11% YoY, while surging 20% QoQ from SAR 141 million. Moreover, operating profit dwindled 12% YoY achieving SAR 148 million compared with SAR 168 million in Q1 2017, however soaring 32% QoQ from SAR 112 million. Therefore, the operating profit margin shrank to 44.9% compared to 48.6% for Q1 2017, nonetheless the margin leapt from 33.7% in the previous quarter. Total market sales in Q1 2018 tumbled 12.7% YoY reaching 11.91 million tons compared with 13.64 million tons in Q1 2017. The figure shrank slightly by 0.6% from 11.98 million tons in the previous quarter. Meanwhile, clinker inventory reached the highest level recording 35.7 million tons by the end of March 2018. 100 90 80 70 Source: Tadawul Quarterly Sales (SAR mn) and ROS Sales Ros 600 60% 500 50% 400 40% 300 30% 200 20% 100 10% 0 0% Source: Company Filings, Albilad Capital Research Estimates Mohammad H. Atiyah Financial Analyst MH.Atiyah@albilad-capital.com For more information, please contact: Turki Fadaak Research & Advisory Manager TFadaak@albilad-capital.com Net profit for Q1 2018 surpassed our estimate of SAR 120 million and analysts’ consensus of SAR 126 million; we believe the deviation stemmed from the significant increase in the cost per ton in the first quarter to SAR 76 per ton versus SAR 96 in the previous quarter. Meanwhile, the average selling prices in the first quarter tumbled to SAR 228 per ton compared to SAR 242 in Q4 2017, while the prices improved from SAR 224 in Q1 2017. It is worth to mention that Saudi Cement has high average selling prices compared with other companies in the sector. As stated in our previous report, we believe that the company will face a difficulty to maintain high selling prices, especially in light of high levels of clinker stocks coupled with weak demand in the local market and the slowdown in main neighboring economies, despite the expected benefit of the cancellation of the export tariffs given the company's proximity to Saudi borders. As a result, we maintained our valuation of Saudi Cement at SAR 51 per share; after reviewing future estimates for the company’s performance in the coming years factoring in the gradual removal of subsidies on energy products, which will significantly impact profitability margins going forward. FY - Ending December 2015A 2016A 2017A 2018E EV/EBITDA 6.61 7.13 12.11 12.53 EV/Sales 4.27 4.64 6.97 6.89 P/E 8.38 8.74 17.37 17.67 11.7% 10.7% 7.8% 7.8% P/BV 2.42 2.47 2.74 2.91 P/Revenue 4.08 4.43 6.65 6.57 -4.6% -8.0% -33.4% 1.2% 6.15 5.89 2.96 2.91 Dividend Yield Revenue Growth EPS (SAR) Source: Company Filings, Albilad Capital Research Estimates 1
2. Saudi Cement Cement Sector May 6 , 2018 SACCO AB - 3030.SE Income Statement (SAR mn) 2014A 2015A 2016A 2017A 2018E Sales 2,024.6 1,932.4 1,778.1 1,184.5 1,198.7 COGS 590.3 577.1 521.5 407.5 442.6 SG&A 105.6 106.3 98.5 95.3 97.4 EBITDA 1,328.7 1,249.1 1,158.2 681.8 658.7 EBITDA Margin 65.6% 64.6% 65.1% 57.6% 55.0% Depreciation and amortization 205.2 219.3 226.1 208.3 194.8 1,123.4 1,029.8 932.1 473.5 464.0 (15.2) (12.1) (16.9) (12.9) (12.7) 2.8 (53.3) 9.3 4.4 5.9 1,111.0 964.4 924.5 465.0 457.2 36.9 24.2 23.5 11.5 11.4 Net Income 1,074.1 940.2 901.0 453.4 445.8 ROS 53.1% 48.7% 50.7% 38.3% 37.2% Balance Sheet (SAR mn) 2014A 2015A 2016A 2017A 2018E Cash and marketable securities 298.3 383.0 183.8 119.9 112.9 Accounts Receivables 216.7 226.9 259.4 237.3 240.1 Inventory 668.5 754.9 723.1 741.5 729.1 Others 63.4 51.4 40.1 37.5 38.8 Total ST Assets 1,246.9 1,416.2 1,206.5 1,136.1 1,121.0 Net Fixed Assets 3,109.4 2,876.4 2,734.6 2,557.4 2,409.3 Projects Under Implementation 64.1 138.1 160.1 182.4 171.2 Others 86.9 82.8 60.1 59.8 59.2 Total LT Assets 3,260.4 3,097.4 2,954.8 2,799.6 2,639.8 Total Assets 4,507.3 4,513.6 4,161.2 3,935.8 3,760.8 Short term debt and CPLTD 735.0 750.0 400.0 550.0 550.0 Accounts Payable 51.9 90.8 104.0 91.7 94.0 Accrued Expenses 110.6 120.4 132.7 107.6 106.9 EBIT Net interest income Others Pre-Tax and Zakat Income Tax and Zakat Others 209.1 205.2 247.5 229.7 217.6 1,106.6 1,166.5 884.2 979.0 968.5 Total Long Term Debt 150.0 0.0 0.0 0.0 0.0 Other Non-Current Liabilities 91.4 91.3 87.5 78.9 81.5 Equity 3,159.3 3,255.8 3,189.6 2,877.9 2,710.8 Total Liabilities and Equity 4,507.3 4,513.6 4,161.2 3,935.8 3,760.8 Total ST Liabilities Source: Company Filings, Albilad Capital Research Estimates Presentation of financial statements may differ from the company’s presentation. However, there is no impact on the final results. * The financial statements for the period 2016 - 2018 are presented according to IFRS. 2
3. Saudi Cement Cement Sector May 6 , 2018 SACCO AB - 3030.SE Cement and Clinker Summary by the End of Q1 2018 Figure in thousand ton Q1 2018 Q1 2017 YoY Q4 2017 QoQ Cement 11,996 13,693 (12%) 11,933 1% Clinker 11,109 12,870 (14%) 11,815 (6%) Cement 11,910 13,643 (13%) 11,982 (1%) Clinker 130 2 - - - Cement 1,184 1,239 (4%) 1,092 8% Clinker 35,739 28,999 23% 35,626 0.3% 747 1,242 (40%) 837 (11%) Sector Production Sector Dispatches Sector Inventory Cement Production / Company Yamama Cement Saudi Cement 1,533 1,455 5% 1,267 21% Eastern Cement 572 618 (7%) 660 (13%) Qassim Cement 933 1,068 (13%) 1,054 (11%) Yanbu Cement 1,439 1,645 (13%) 1,288 12% Arabian Cement 1,035 1,122 (8%) 881 17% Southern Cement 1,322 1,518 (13%) 1,481 (11%) Tabuk Cement 352 337 4% 305 15% Riyadh Cement 510 868 (41%) 573 (11%) Najran Cement 498 568 (12%) 501 (1%) City Cement 722 1,031 (30%) 859 (16%) Northern Cement 351 305 15% 308 14% Jouf Cement 348 434 (20%) 346 1% Safwa Cement 465 478 (3%) 448 4% Hail Cement 335 266 26% 325 3% Umm Al-Qura Cement 366 302 21% 352 4% United Cement 468 436 7% 448 4% 746 1,242 (40%) 865 (14%) Cement Dispatches / Company Yamama Cement Saudi Cement 1,450 1,471 (1%) 1,314 10% Eastern Cement 579 614 (6%) 651 (11%) Qassim Cement 923 1,073 (14%) 1,045 (12%) Yanbu Cement 1,489 1,592 (6%) 1,258 18% Arabian Cement 1,035 1,113 (7%) 875 18% Southern Cement 1,312 1,527 (14%) 1,489 (12%) Tabuk Cement 357 343 4% 314 14% Riyadh Cement 510 862 (41%) 581 (12%) Najran Cement 479 566 (15%) 503 (5%) City Cement 722 1,051 (31%) 865 (17%) Northern Cement 348 323 8% 306 14% Aljouf Cement 341 409 (17%) 332 3% Safwa Cement 467 485 (4%) 445 5% Hail Cement 328 263 25% 325 1% Umm Al-Qura Cement 363 303 20% 359 1% United Cement 461 406 14% 455 1% Source: Yamama Cement Statistics, Albilad Capital Research 3
4. Saudi Cement Cement Sector May 6 , 2018 SACCO AB - 3030.SE Albilad Capital Rating Methodology Al-Bilad Capital uses its own evaluation structure, and its recommendations are based on quantitative and qualitative data collected by the analysts. Moreover, the evaluation system places covered shares under one of the next recommendation areas based on the closing price of the market, the fair value that we set and the possibility of ascent/descent. Overweight: The Target share price exceeds the current share price by ≥ 10%. Neutral: The Target share price is either more or less than the current share price by < 10%. Underweight: The Target share price is less than the current share price by ≥ 10%. To be Revised: No target price had been set for one or more of the following reasons: waiting for more analysis, waiting for detailed financials , waiting for more data to be updated, major change in company`s performance, change in market conditions or any other reason from Albilad Capital Research. Albilad Capital Client Services E-mail: Tel: clientservices@albilad-capital.com +966-11-203-9888 Toll-free: 800-116-0001 Research & Advisory E-mail: research@albilad-capital.com Tel: +966-11-290-6250 Website: www.albilad-capital.com/en/research Asset Management Brokerage Custody Investment Banking E-mail: Tel: E-mail: Tel: abicasset@albilad-capital.com +966-11-290-6280 custody@albilad-capital.com +966-11-290-6259 E-mail: Tel: E-mail: Tel: abicctu@albilad-capital.com +966-11-290-6230 investmentbanking@albilad-capital.com +966-11-290-6256 Disclaimer AlBilad Capital exerted utmost efforts to ensure that the information included in this report is accurate and correct. However, AlBilad Capital Co., its managers, and staff bear no liability whether explicitly or implicitly for the content of the report and no legal responsibility, whether directly or indirectly, for any results based on it. This report should not be reproduced, redistributed, or sent directly or indirectly to any other party or published in full or in part for any purpose whatsoever without a prior written permission from AlBilad Capital. We would also like to note that this information in no way constitutes a recommendation to buy or sell banknotes or make any investment decisions. Any investment act taken by an investor based fully or partially on this report is the complete responsibility of the investor. This report is not meant to be used or seen as advice or an option or any other measure to be taken in the future. We recommend consulting a qualified investment advisor before investing in these investment tools. AlBilad Capital preserves all rights associated with this report. CMA Authorization Number 08100-37 4