a Saudi Cement Company

January 2012
KMEFIC Research
Equity Analysis Report
Customers’ Power: A lot of the Saudi cement companies have shut down some of their production
lines due to the export ban placed on cement. This reduction in supply is being coupled with an
increase in demand due to the huge ongoing infrastructural projects. While the possibility of excess
demand weakens customers’ power, the standardized nature of the product (cement) raises their
power due to very low switching costs. Thus, customers’ power in the Saudi cement industry is
moderate.
Threat of Substitutes: Cement is a necessary input in most types of construction, and there is no
real substitute for it in such projects. Thus, the threat of substitutes is very low.
Business Rivalry: The large number of competing firms (13 to be exact) in the Saudi cement
industry as well as the standardized nature of the product (cement) intensifies competition.
However, an increase in total cement production is being met with an increase in sales volume due
to growing demand. This makes price wars among the cement companies unlikely. Additionally,
firms do not have to compete fiercely for market share due to the nature of the growing industry.
Firms are able to improve revenues simply because of the expanding market. Furthermore, the
companies are geographical dispersed due to the Kingdom’s size. Thus the business rivalry in the
Saudi cement industry is moderate.
Financial Performance
Domestic Sales vs. Exports
Yamama’s sales volume has been in an Figure 5 - Domestic Sales Volume vs Exports Volume (mtpa)
upward trend over the 2007 – 2010
6.0
period, growing on average 0.0
0.0
6.2% a year 5.0
to reach 5.5 million tons in 2010.
0.3
0.3
Exports
4.0
Exports volume faded away after 2008
following the government’s decision to 3.0
5.2 5.5
ban cement exports in June 2008 and all
Domestic
2.0 4.3 4.1
Sales
subsequent sales volume were domestic.
1.0
This did not impact Yamama as domestic
sales volume grew 28% YoY in 2009
and 5.4% in 2010, largely due to the hike
in cement demand across the Kingdom.
0.0
2007 2008 2009
Sources: Company filings, KMEFIC Research
2010
Yamama’s sales volume in the first 11 months of 2011 reached 5.4 million tons, growing 8.9%
YoY and slightly below the industry’s average sales volume growth of 13%.
Revenue & Margins
Revenues grew at an average of 8.1%
annually over the 2006 – 2010 period
and grew 12.1% in the first 9 months of
2011 in comparison to the same period
last year. Net income declined in 2008
and 2009 but has recovered ever since,
growing 16.9% in 2010 and 10.4% in
the first 9 months of 2011 in
comparison to the same period last year.
Revenues reached SAR 1,272 million in
2010 and net income SAR 657 million,
representing a 52% profit margin.
Yamama’s profit margin has declined
over time, going from 63% in 2006 to
Figure 6 - Revenues, Net Income, and Profit Margin
Revenue Net income
Profit margin
1,400 63% 62%
70%
1,200
54%
48%
52% 51% 60%
1,000
50%
SAR Millions
800
600
400
200
0
Sources: Company filings, KMEFIC Research
40%
30%
20%
10%
0%
Yamama Saudi Cement Co.
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