RIYADH: The total cement sales in Saudi Arabia fell 6.8 per cent year-on-year (y-o-y) to 47 million ton in the first ten months from 50.2 million ton for the same period last year, said a report. The clinker production too slightly declined 1.7 per cent y-o-y, stated top Saudi lender Al Rajhi Capital in its report. Also the total cement sector revenues declined 19 per cent y-o-y on the back of lower sales volume (down 10.5 per cent y-o-y) and drop in the average realized price/ton for most of the companies. Similarly, the aggregate net income came in at SR853 million (down 22 per cent y-o-y), mainly due to a sharp increase in cost of goods sold.
In a sign of continuing woes for the industry, the Saudi cement inventories continued to rise with a 16.4 per cent year-on-year growth driven by a fall in sales volumes and record production levels, said the Al Rajhi Capital Research report. Interestingly, the aggregate clinker production increased one per cent on a year-on-year basis in spite of a 15 per cent y-o-y drop in dispatches probably to benefit in case of further increase in energy prices.
According to the latest data released by Yamama Cement, the total cement dispatches in the kingdom fell 15 per cent y-o-y, but grew 29 per cent month-on-month (m-o-m) to 4.32 million ton in October. The total inventory climbed 16.4 per cent y-o-y and 1.7 per cent m-o-m to a new record of 28.2 million ton, representing 49 per cent of the last 12 months’ sales. Surprisingly, the clinker production came in at 4.5 million ton during October, up one per cent y-o-y (+24 per cent m-o-m). Tabuk and Qassim cement were the only cement producers that reported positive y-o-y growth in sales volume by 7 per cent and 3 per cent, respectively, while Northern and Najran cement witnessed the most declines by -49 per cent and -45 per cent y-o-y, respectively.
The Southern and Saudi cement continue to lead the market with shares of 13.8 per cent and 13.2 per cent year-to-date (YTD), respectively. On the pricing side, most of cement producers continue to offer deep discounts especially in the Central and Western regions as smaller players focus on main demand regions, said the report.
Saudi cement’s average realised price fell three per cent y-o-y in the first nine months, while other companies witnessed a decline of 6 to 10 per cent on a y-o-y basis, it stated. On the future outlook, Al Rajhi Capital Research said: “Going forward, we believe that construction activities will remain weak for the foreseeable future as the government spending adjusts to low oil prices through spending cuts and prioritization of projects.” “In November and December, we expect cement demand to remain modest, and achieving a positive y-o-y growth could be a challenge for companies. However, we expect clinker production to increase given the probability of further reduction of subsidies in the short-term,” it added.
