By: Mohamed Idris
Riyadh - Mubasher: The recent decision that obliges Saudi Cement exporters to pay fees at SAR 85 to 133 per tonne will cut profits margins for cement companies, analysts told Mubasher.
The decision comes in time when benefits from exporting cement are already very limited due to the restrictions lifting the government ban, it will however encourage manufacturers to sell their product in the local market which offers higher attractive revenues which allows competitive pricing and discounts.
Financial analyst Jasim Al-Joubran of Al-Jazirah Capital said to Mubasher that cement exporting benefits are currently limited which lowers the Saudi cement competitive advantage in global markets, adding that raising actual cost of imported cement is expected increase prices to SAR 280 to 340 per tonne.
There are also limited exporting opportunities in global markets, with Yemen, Iraq, and Qatar representing the main destinations which gives and edge to companies in northern and eastern areas, while producers in southern areas might benefit from the reconstruction of Yemen, he added.
Al-Joubran forecasted low annual profits due to weak liquidity and a decreased government spending, but he also expects an increase in sales in Q4-16, and while weak sales are expected to continue in the first few months of the new year, a recovery is anticipated in 2018.
Meanwhile, Khaled Al-Modyan, financial analyst at Riayd Capital, said that there will be no effect on the cement companies if their sales are limited to local markets, explaining that it will only affect exporters.
Al-Modyan also noted that cutting public spending has negatively impacted the cement sector which peaked by the end of 2015 only to later see lower sales volumes compared to the year before, which was reflected on the reduced cash dividends by cement companies, despite enjoying high levels of liquidity.
