Riyadh – Mubasher: Qassim Cement achieved SAR 70.4 million profits in the third quarter of 2016, which came below the estimates of Al Rajhi Capital of SAR 86 million.
"Earnings declined mainly due to sharp drop in gross margin to 49.3% (vs. 60.1% in Q3 2015) which in turn was due to lower sales volume and average realized price/ton," Al Rajhi Capital reported.
Operating profit of SAR 78.3 million was also below the estimates of SAR 91 million.
Higher cost of goods was due to higher fuel prices and falling demand due to the slowdown in construction activities, which have put further downward pressure on the company’s profits.
Qassim cement cut Q3 dividend to SAR 1 per share from SAR 1.5 per share in Q3-15, as expected.
Moreover, the cement company's revenues reached SAR 171.2 million, as compared to Al Rajhi's SAR 180 million estimates, as its sales volume declined 8.7% year-on-year in July and August to 534,000 tonnes.
"We believe that recording a positive year-on-year growth in sales volume could be a challenge for the company in the remaining months of 2016 as well," the report said.
The investment firm maintained the neutral rating, with setting SAR 55 per share as a new target price (TP), after SAR 64.
