Ksa Cement Monthly Review - May 2013

8/22/2019 Ksa Cement Monthly Review - May 2013

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Please refer to the last page for important disclaimer www.ncbc.com

The Kingdoms cement production increased 13.3% YoY to5.33mn tons in Apr-13, while clinker production decreased 4.3%YoY to 3.96mn tons. Domestic sales of cement increased by14.1% YoY to 5.34mn tons. Northern Cement reported the highestYoY increase in domestic cement sales at 144.3%, followed byAljouf Cement with an increase of 39.1%. On the other hand,Eastern Cement reported the highest YoY decline in domesticcement sales at 10.2%.

Sales: Domestic cement sales for Apr-13 increased by 14.1% YoY, but

decreased 2.0% MoM to 5.34mn tons. Cement sales including exportsincreased by 13.5% YoY to reach 5.39mn tons.

Production: Cement production increased by 13.3% YoY, but decreased5.6% MoM 5.33mn tons. Clinker production decreased by 4.3% YoY and

17.2% MoM to 3.96mn tons in Apr-13.

Inventory: Clinker inventory levels decreased 4.2% YoY and by 14.3% MoMto reach 4.66mn tons in Apr-13. Cement inventory levels also decreased

5.5% YoY and by 6.9% MoM to reach 0.65mn tons.

Cement market share: The biggest market share gainer was SouthernCement with an increase of 0.81% MoM to 13.33% while the biggest decliner

was Najran Cement with a decrease of 0.73% MoM to 4.85%.

Exhibit 1: Chart of the month: Total sales by region

-5%

0%

5%

10%

15%

20%

25%

30%

35%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Western Central Eastern Southern Northern

Jan-Apr 2012 Jan-Apr 2013 YoY (%)

Source: Yamama Cement, NCBC ResearchNote: Does not factor cross-regional sales. Western region sales in Apr-13 include sales of Safwa cement which were not included in

Apr-12.

Exhibit 2: Saudi cement companies Valuation matrix

MCapStock perf

(%)P/E(x)

EV/EBITDA

P/BV(x)

EV/ton($)

DY(%)

ROE(%)

Rating $mn Apr YTD 13 13 13 13 13 13

Southern Cement (SPCC) N 3,757 (1.0) 0.5 13.5 11.1 5.1 644 7.1 38.0

Yamama Cement (YSCC) N 2,677 7.8 4.2 12.2 8.1 2.8 474 6.1 23.2

Saudi Cement (SCC) N 4,045 8.5 4.2 14.2 10.6 5.7 447 8.0 40.3

Qassim Cement (QCC) N 1,917 1.9 (0.9) 12.6 9.7 3.9 509 8.8 31.5

Yanbu Cement (YCC) N 1,949 12.2 32.8 13.4 10.6 3.7 398 4.7 28.6

Eastern Cement (EPCC) N 1,343 4.9 1.7 12.6 10.7 2.5 448 6.8 20.0

Arabian Cement* (ACC) NC 1,522 17.6 42.5 14.5 8.9 1.9 341 5.6 13.2

Al Jouf Cement* (JCC) NC 625 10.7 10.1 21.7 13.5 1.7 312 2.8 7.8Tabuk Cement* (TCC) NC 709 13.5 21.6 13.5 7.9 2.1 403 4.8 16.7

Najran Cement* (NAJC) NC 1,162 14.3 35.4 19.1 - 2.4 468 4.3 13.3

Source: Bloomberg, NCBC Research.All prices as of 19 May, 2013, * On a TTM basisN: Neutral, NC: Not Covered

MAY 2013

KSA CEMENT MONTHLY

PRESSURE ON INVENTORY DUE TO DEMAND

Abdulelah [email protected]

+966 2 690 7771


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KSA CEMENT MONTHLY NCB CAPITAL

MAY 2013

2

Industry snapshot

The Kingdom of Saudi Arabia (KSA) has 14 cement companies with an

estimated annual cement production capacity of 55.7mn tons.

In Apr-13, total cement sales in KSA stood at 5.34mn tons versus 4.68mn tons

in Apr-12 and 5.45mn tons in Mar-13. Clinker sales for the month decreased

59.7% YoY to reach 5,800 tons. However, it increased 1,060% MoM due to the

increase in clinker sales from Northern Cement from 2,000 tons in Mar-13 to

55,000 tons in Apr-13.

Cement exports for the month of Apr-13 decreased 30.2% YoY to reach 44,000

tons, down from 63,000 tons in Apr-12. No company reported clinker exports in

Apr-13. Three companies exported cement during the month - Riyadh Cement,

Saudi Cement and Eastern Cement.

Exhibit 3: April-2013 at a glance

Source: Yamama Cement, NCBC Research. NB: Data refers to domestic cement sales and cement exports onlyCCC City Cement, NJCC Najran Cement, RCC Riyadh Cement, NRCC Northern Region Cement, ASCC Al Safwa Cement

EPCC (3.5)Sales: 256; -4.1%

Exports: 7; -12.5%

SCC (8.6)Sales: 851; -0.6%

Exports: 15; -21.1%

YSCC (6.3)Sales: 644; -6.3%Exports: 0; NA

RCC (3.6)Sales: 315; -7.4%

Exports: 22; 214.3%

CCC (3.0)Sales: 182; 8.3%Exports: 0; NA

QCC (4.1)Sales: 395; -1.0%

Exports: 0; NA

TCC (1.3)

Sales: 139; 0%Exports 0; NA

YCC (6.3)Sales: 630; 0.5%Exports: 0; NA

NRCC (1.7)Sales: 237; 16.7%Exports: 0; NA

ACC (3.3)Sales: 392; -9.5%

Exports: 0; NA

SPCC (7.5)Sales: 712; 4.4%Exports 0; NA

NJCC (2.9)Sales: 259; -14.8%Exports: 0; NA

Company (Cement capacity in mn tons)Months sales in 000 tons; Growth MoMMonths exports in 000 tons; Growth MoM

Legend

JCC (1.7)Sales: 160; -5.9%Exports 0; NA

ASCC (1.5)Sales: 171; -2.3%

Exports: 0; NA


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MAY 2013

3

Domestic sales

In Apr-13, domestic sales of cement increased by 14.1% YoY, but decreased

2.0% MoM to 5.34mn tons, compared to 5.45mn tons in Mar-13. On a MoM

basis, Northern Cement reported the highest increase in domestic cement salesat 16.7%, while Najran Cement reported the highest decrease at 14.8%. On a

YoY basis, Northern Cement reported the highest increase in cement sales at

144.3%, followed by Aljouf Cement with an increase of 39.1%.

The two private companies - Riyadh and Safwa Cement reported a 5.6% MoM

decrease in domestic cement sales. On a MoM basis, both Riyadh Cement and

Safwa Cement reported a decrease in cement sales by 7.4% and 2.3%

respectively.

Exhibit 4: Domestic cement sales MoM Exhibit 5: Domestic cement sales YoY

000 tons 000 tons

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

0

100

200

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400

500

600

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900

Yamama Saudi Eastern Qassim Yanbu Arabian Southern Tabuk Naj ran

Mar-13 Apr-13 MoM growth (RHS)

-15%

0%

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30%

0

100

200

300

400

500

600

700

800900

Yamama Saudi Eastern Qass im Yanbu ArabianSouthern Tabuk Najran

Apr-12 Apr-13 YoY growth (RHS)

Source: Yamama Cement, NCBC Research Source: Yamama Cement, NCBC Research

(Please refer to the Appendix on Page 9 for company-specific charts.)

Exports

The Kingdoms cement exports decreased 30.2% YoY from 63,000 tons in Apr-

12 to 44,000 tons in Apr-13. The main reason behind this decline is the

decrease in Saudi Cement exports from 48,000 tons in Apr-12 to 15,000 tons in

Apr-13 (a decrease of 68.8% YoY) offset partially by an increase in Riyadh

Cement exports from 3,000 tons in Apr-12 to 22,000 tons in Apr-13. Riyadh

Cement, Saudi Cement and Eastern Cement were the only companies that

exported cement in Apr-13.

Exhibit 6: KSAs total cement exports Exhibit 7: Exports by SCC, EPCC and RCC

000 tons 000 tons

0

100

200

Apr-10 Aug-10 Dec-10 Apr-11 Aug-11 Dec-11 Apr-12 Aug-12 Dec-12 Apr-13

0

20

40

60

80

100

120

140

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

Oct-11

Jan-12

Apr-12

Jul-12

Oct-12

Jan-13

Apr-13

Saudi Cement Eastern Cement Riyad Cement



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MAY 2013

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Production

Saudi Arabias cement production increased 13.3% YoY, but decreased 5.6%

MoM to 5.33mn tons in Apr-13.

Northern Cement reported the highest YoY and MoM increase in cementproduction at 98.3% and 8.1%, respectively. On the other hand, Eastern Cement

reported the highest YoY decline at 12.2%.

Clinker production was down 4.3% YoY and 17.2% MoM in Apr-13 to reach

3.96mn tons. On a MoM basis, City Cement was the only company that reported

an increase in production at 38.8%, while all the other companies reported a

decline in production. On YoY basis, City Cement reported the highest increase

in clinker production at 41.2%, while Al Jouf Cement reported the highest

decrease at 71.6%.

(Please refer to the Inventory / stock section on Page 5 for more details).

Exhibit 8: Cement production Exhibit 9: Clinker production000 tons 000 tons

0

900

1,800

2,700

3,600

4,500

5,400

6,300

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2011 2012 2013

0

900

1,800

2,700

3,600

4,500

5,400

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2011 2012 2013



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MAY 2013

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Inventory level

In Apr-13, clinker inventory at the sector level decreased by 4.2% YoY and

14.3% MoM to 4.66mn tons. Cement inventory also decreased by 5.5% YoY and

by 6.9% MoM to 0.65mn tons in Apr-13.

Exhibit 10: Cement inventory Exhibit 11: Clinker inventory

000 tons 000 tons

0

40

80

120

160

Yamama Saudi Eastern Qassim Yanbu Arabian Southern Tabuk Riyadh

Apr-12 Mar-13 Apr-13

0

100

200

300

400

500

600

700

800

900

1,000


Apr-12 Mar-13 Apr-13


The sectors clinker inventory as a percentage of monthly sales decreased to

87% in Apr-13 compared to 103% in Apr-12 and 99% in Mar-13. Company wise,

Yamama Cement, Saudi Cement and Riyadh Cement had the lowest inventory

percentages at 21%, 54% and 59% of Apr-13 sales. Among the listed

companies, both Northern Cement and City Cement held the highest clinker

inventory percentage at 289% of Apr-13 sales.

Exhibit 12: Clinker inventory Exhibit 13: Clinker inventory

000 tons as % of sales

0%

100%

200%

300%

400%

500%

0

1,500

3,000

4,500

6,000

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10,500

12,000

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

Oct-11

Jan-12

Apr-12

Jul-12

Oct-12

Jan-13

Apr-13

Clinker inventory ('000 tons) Clinker inventory as% of cement sales (RHS)

0%

50%

100%

150%

200%

250%


Apr-12 Apr-13



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MAY 2013

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Market share

In Apr-13, six companies lost domestic cement market share. Among the listed

companies, Najran Cement, reported the highest drop in market share by 0.73%

to 4.85%, while Southern Cement was the biggest gainer with its market share

increasing by 0.81% to 13.3%.

Gainers: Southern Cement (0.81%), Northern Cement (0.71%), City Cement

(0.32%), Yanbu Cement (0.29%), Saudi Cement (0.22%), Qassim Cement

(7bps) and Tabuk Cement (5bps).

Decliners: Najran Cement (0.73%), Arabian Cement (0.61%), Yamama Cement

(0.55%), Riyadh Cement (0.34%), Al Jouf Cement (0.12%) and Eastern Cement

(0.11%).

Exhibit 14: Domestic market share cement sales Exhibit 15: Domestic market share cement sales

MoM YoY

0%

4%

8%

12%

16%

20%

Yamama

Saudi

Eastern

Qassim

Yanbu

Arabian

Southern

Tabuk

Riyadh

Najran

City

Northern

Aljouf

Mar-13 Apr-13

0%

4%

8%

12%

16%

20%

Yamama

Saudi

Eastern

Qassim

Yanbu

Arabian

Southern

Tabuk

Riyadh

Najran

City

Northern

Aljouf

Apr-12 Apr-13



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MAY 2013

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Valuation

As of 19 May 2013, the cement sector index was up 12.7% YTD, as compared

to the TASI which was up 7.3% during the same period. Exhibit 16 shows the

valuation multiples of all listed cement companies in the Kingdom.

Exhibit 16: Saudi cement companies Valuation matrix

M-Cap Stock perfP/E(x)

EV/EBITDA

P/BV(x)

EV/ton($)

DY(%)

ROE(%)

ROA(%)

Reuters Rating $mn Apr YTD 13 13 13 13 13 13 13

Southern Cement (SPCC) 3050.SE Neutral 3,757 (1.0) 0.5 13.5 11.1 5.1 644 7.1 38.0 26.1Yamama Cement (YSCC) 3020.SE Neutral 2,677 7.8 4.2 12.2 8.1 2.8 474 6.1 23.2 20.8Saudi Cement (SCC) 3030.SE Neutral 4,045 8.5 4.2 14.2 10.6 5.7 447 8.0 40.3 29.0Qassim Cement (QCC) 3040.SE Neutral 1,917 1.9 (0.9) 12.6 9.7 3.9 509 8.8 31.5 27.0Yanbu Cement (YCC) 3060.SE Neutral 1,949 12.2 32.8 13.4 10.6 3.7 398 4.7 28.6 18.3Eastern Cement (EPCC) 3080.SE Neutral 1,343 4.9 1.7 12.6 10.7 2.5 448 6.8 20.0 18.4Arabian Cement* (ACC) 3010.SE NC 1,522 17.6 42.5 14.5 8.9 1.9 341 5.6 13.2 8.8Al Jouf Cement* (JCC) 3091.SE NC 625 10.7 10.1 21.7 13.5 1.7 312 2.8 7.8 5.5

Tabuk Cement* (TCC) 3090.SE NC 709 13.5 21.6 13.5 7.9 2.1 403 4.8 16.7 14.1Najran Cement* (NAJC) 3002.SE NC 1,162 14.3 35.4 19.1 - 2.4 468 4.3 13.3 8.5

Source: Bloomberg, NCBC ResearchAll prices as of 19 May, 2013, * On a TTM basisNC: Not Covered

Exhibits 17 and 18 capture the current valuation of Saudi cement companies.

Exhibit 17: EV per ton vs. EBITDA margin

Yamama CementSaudi Cement

Eastern Cement

Qassim Cement

Yanbu Cement

Arabian Cement*

Southern Cement

Tabuk Cement*

Najran Cement

200

250

300

350

400

450

500

550

600

650

700

40% 50% 60% 70% 80%

Size of the bubbleindicates M-Cap

EV/Ton(USD)-2013E

EBITDA Margin - 2013E

Dotted lines representindustry averages

Source: NCBC Research, * is on TTM basis


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MAY 2013

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Exhibit 18: P/E vs. ROE

Yamama Cement

Saudi Cement

Eastern Cement

Qassim CementYanbu Cement

Arabian Cement*

Southern Cement

Tabuk Cement*

Najran Cement

0

10

20

30

40

50

7 9 11 13 15 17 19

Size of the bubbleindicates M-Cap

ROE(%)-2013E

P/E - 2013E

Dotted lines representindustry averages

Source: NCBC Research, * is on TTM basis


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MAY 2013

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Appendices

Appendix 1- Cement Production and Sales

Exhibit 19: Cement production and KSA sales000 tons

% chg % chg (Jan-Apr) % chg

Description Apr-13

Apr-12 YoY Mar-13 MoM 2013 2012 Apr-13

ProductionCement 5,332 4,705 13.3 5,648 (5.6) 20,969 19,016 10.3Clinker 3,961 4,140 (4.3) 4,783 (17.2) 17,072 15,410 10.8Domestic SalesCement 5,343 4,683 14.1 5,450 (2.0) 20,906 18,769 11.4Clinker 58 144 (59.7) 5 NA 71 301 (76.4)Company-wise Cement ProductionYamama Cement 677 606 11.7 691 (2.0) 2,628 2,525 4.1Saudi Cement 856 818 4.6 941 (9.0) 3,305 3,294 0.3Eastern Cement 260 296 (12.2) 284 (8.5) 1,142 1,251 (8.7)Qassim Cement 388 379 2.4 396 (2.0) 1,540 1,502 2.5Yanbu Cement 620 532 16.5 632 (1.9) 2,448 1,743 40.4Arabian Cement 380 375 1.3 452 (15.9) 1,503 1,546 (2.8)Southern Cement 699 649 7.7 684 2.2 2,712 2,596 4.5Tabuk Cement 127 143 (11.2) 142 (10.6) 561 561 0.0Riyadh Cement 325 322 0.9 356 (8.7) 1,322 1,350 (2.1)Najran Cement 257 182 41.2 323 (20.4) 1,142 917 24.5City Cement 177 180 (1.7) 165 7.3 607 760 (20.1)Northern Cement 228 115 98.3 211 8.1 756 448 68.8Aljouf Cement 168 108 55.6 190 (11.6) 635 523 21.4Company-wise Domestic Sales

Yamama Cement 644 578 11.4 687 (6.3) 2,624 2,513 4.4Saudi Cement 851 746 14.1 856 (0.6) 3,290 3,138 4.8Eastern Cement 256 285 (10.2) 267 (4.1) 1,116 1,199 (6.9)

Qassim Cement 395 384 2.9 399 (1.0) 1,551 1,511 2.6Yanbu Cement 630 547 15.2 627 0.5 2,445 1,736 40.8Arabian Cement 392 394 (0.5) 433 (9.5) 1,517 1,560 (2.8)Southern Cement 712 663 7.4 682 4.4 2,728 2,607 4.6Tabuk Cement 139 144 (3.5) 139 0.0 573 556 3.1Riyadh Cement 259 202 28.2 304 (14.8) 1,277 1,353 (5.6)Najran Cement 182 191 (4.7) 168 8.3 1,155 936 23.4City Cement 237 97 144.3 203 16.7 592 752 (21.3)Northern Cement 160 115 39.1 170 (5.9) 768 410 87.3Aljouf Cement 315 337 (6.5) 340 (7.4) 608 498 22.1

Source: Yamama Cement, NCBC Research


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MAY 2013

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Appendix 2 - Chart gallery Company data

Yamama Cement (YSCC)

Exhibit 20: Production and sales Exhibit 21: Inventory Cement and clinker

000 tons 000 tons

0

100

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800

Apr-12

May-12

Jun-12

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Apr-13

Clinker Production Domestic Sales - Cement

0

200

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1,000

1,200

Apr-12

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Jun-12

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Aug-12

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Clinker Stock Cement Stock


Saudi Cement (SCC)


000 tons 000 tons

300

450

600

750

900

Apr-12

May-12

Jun-12

Jul-12

Aug-12

Sep-12

Oct-12

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0

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Eastern Province Cement (EPCC)


000 tons 000 tons

100

150

200

250

300

350

Apr-12

May-12

Jun-12

Jul-12

Aug-12

Sep-12

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Apr-13

Clinker Produc tion Domestic Sales - Cement

0

150

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450

Apr-12

May-12

Jun-12

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MAY 2013

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Qassim Cement (QCC)


000 tons 000 tons

0

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400

500

Apr-12

May-12

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Yanbu Cement (YCC)Exhibit 28: Production and sales Exhibit 29: Inventory Cement and clinker

000 tons 000 tons

0

100

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Apr-12

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Arabian Cement (ACC)


000 tons 000 tons

100

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200250

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450

Apr-12

May-12

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MAY 2013

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Southern Province Cement (SPCC)


000 tons 000 tons

200

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800

Apr-12

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Tabuk Cement (TCC)Exhibit 34: Production and sales Exhibit 35: Inventory Cement and clinker

000 tons 000 tons

50

75

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A

pr-12

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Al Jouf Cement (JCC)


000 tons 000 tons

0

40

80

120

160

200

Apr-12

May-12

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Najran Cement (NAJC)


000 tons 000 tons

0

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280

320360

Apr-12

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City Cement (TCC)Exhibit 40: Production and sales Exhibit 41: Inventory Cement and clinker

000 tons 000 tons

0

40

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Apr-12

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-12

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-12

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Northern Cement (NRCC)


000 tons 000 tons

0

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300

Apr-12

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0

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980

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14/14


MAY 2013

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NCBC Research website Brokerage website Corporate website

http://research.ncbc.com www.alahlitadawul.com

www.alahlibrokerage.com

www.ncbc.com

NCBC Investment Ratings

OVERWEIGHT: Target price represents expected returns in excess of 15% in the next 12 months

NEUTRAL: Target price represents expected returns between -10% and +15% in the next 12 months

UNDERWEIGHT:

Target price represents a fall in share price exceeding 10% in the next 12 months

PRICE TARGET:

Analysts set share price targets for individual companies based on a 12 month horizon. These share price targets are subject to arange of company specific and market risks. Target prices are based on a methodology chosen by the analyst as the best predictorof the share price over the 12 month horizon

Other Definitions

NR:

Not Rated. The investment rating has been suspended temporarily. Such suspension is in compliance with applicable regulations and/or incircumstances when NCB Capital is acting in an advisory capacity in a merger

or strategic transaction involving the company and in certain other situations

CS:

Coverage Suspended. NCBC has suspended coverage of this company

NC:

Not covered. NCBC does not cover this company

Important information

The authors of this document hereby certify that the views expressed in this document accurately reflect their personal views regarding the securities andcompanies that are the subject of this document. The authors also certify that neither they nor their respective spouses or dependants (if relevant) hold abeneficial interest in the securities that are the subject of this document. Funds managed by NCB Capital and its subsidiaries for third parties may own thesecurities that are the subject of this document. NCB Capital or its subsidiaries may own securities in one or more of the aforementioned companies, orfunds or in funds managed by third parties The authors of this document may own securities in funds open to the public that invest in the securitiesmentioned in this document as part of a diversified portfolio over which they have no discretion. The Investment Banking division of NCB Capital may bein the process of soliciting or executing fee earning mandates for companies that are either the subject of this document or are mentioned in thisdocument.

This document is issued to the person to whom NCB Capital has issued it. This document is intended for general information purposes only, and may not

be reproduced or redistributed to any other person. This document is not intended as an offer or solicitation with respect to the purchase or sale of anysecurity. This document is not intended to take into account any investment suitability needs of the recipient. In particular, this document is notcustomized to the specific investment objectives, financial situation, risk appetite or other needs of any person who may receive this document. NCBCapital strongly advises every potential investor to seek professional legal, accounting and financial guidance when determining whether an investment ina security is appropriate to his or her needs. Any investment recommendations contained in this document take into account both risk and expectedreturn. Information and opinions contained in this document have been compiled or arrived at by NCB Capital from sources believed to be reliable, butNCB Capital has not independently verified the contents of this document and such information may be condensed or incomplete. Accordingly, norepresentation or warranty, express or implied, is made as to, and no reliance should be placed on the fairness, accuracy, completeness or correctness ofthe information and opinions contained in this document. To the maximum extent permitted by applicable law and regulation, NCB Capital shall not beliable for any loss that may arise from the use of this document or its contents or otherwise arising in connection therewith. Any financial projections, fairvalue estimates and statements regarding future prospects contained in this document may not be realized. All opinions and estimates included in thisdocument constitute NCB Capitals judgment as of the date of production of this document, and are subject to change without notice. Past performance ofany investment is not indicative of future results. The value of securities, the income from them, the prices and currencies of securities, can go down aswell as up. An investor may get back less than he or she originally invested. Additionally, fees may apply on investments in securities. Changes incurrency rates may have an adverse effect on the value, price or income of a security. No part of this document may be reproduced without the writtenpermission of NCB Capital. Neither this document nor any copy hereof may be distributed in any jurisdiction outside the Kingdom of Saudi Arabia whereits distribution may be restricted by law. Persons who receive this document should make themselves aware, of and adhere to, any such restrictions. Byaccepting this document, the recipient agrees to be bound by the foregoing limitations.

NCB Capital is authorised by the Capital Market Authority of the Kingdom of Saudi Arabia to carry out dealing, as principal and agent, and underwriting,managing, arranging, advising and custody, with respect to securities under licence number 37-06046. The registered office of which is at Al Matherstreet in Riyadh, P.O. Box 22216, Riyadh 11495, Kingdom of Saudi Arabia.

Ksa Cement Monthly Review - May 2013

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Transcript of Ksa Cement Monthly Review - May 2013