Riyadh-Mubasher: Profit margins of Saudi cement companies will likely remain low on the rise in fuel costs and higher levels of clinker inventories, which led to higher competition for market share and low sale prices, AlJazira Capital said in a report.
“We believe cement sales in 2016 would be in line with last year’s demand growth, which at worst scenario declined by only 3-4%, compared with an 8% increase in 2015,” the research firm said.
In February 2016, Saudi Arabia’s cement dispatches witnessed a modest growth of 3.5% year-on-year as construction activity has showed signs of a slowdown, while monthly cement sales recorded a decline of about 5.3%.
“We believe that demand is likely to maintain its modest growth in the short-term despite the current decline in oil prices,” AlJazira said.
The government will continue spending on vital infrastructure projects and keep the construction activity on track, along with the expected upcoming construction activity of residential units to meet the current housing shortage in Saudi Arabia.
However, the research firm expects some pressures on the sector due to the reduction in overall government spending.
