a Saudi Cement Company

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January 2012 KMEFIC Research Equity Analysis Report Saudi Cement Industry Saudi Arabia is the largest cement producer in the GCC with a production capacity exceeding 42 mtpa at the end of 2010. The Saudi cement industry enjoys an abundance of limestone reserves at low prices in addition to natural gas subsidies provided by Aramco. This allows Saudi cement companies to enjoy higher gross margins than their GCC competitors. Saudi cement companies have raised a request to increase the natural gas subsidies in order to meet growing domestic cement demand caused by new expansions. On June 6 th , 2008, the Ministry of Commerce & Industry took a decision to ban cement exports in order to fix and lower the domestic price of cement. The ban also called for cement companies to maintain 10% of their total cement production in reserves. However, a lot of the companies did not respond to this request despite strong governmental support in the form of low interest rate loans (from the Saudi Industrial Development Fund - SIDF) as well as obtaining quarries at low prices. As a result of the export ban, Saudi cement companies suffered from escalating clinker inventories during 2008 and 2009. Clinker inventory reached 10.9 million tons at the end of 2009, and 7.4 million tons in 2008 against 1.7 million at the end of 2007. In an attempt to curb piling clinker inventories, a lot of the cement companies have shut down some of their production lines. As a result of this step, and in an atmosphere of growing domestic demand due to huge infrastructural projects, clinker inventories of Saudi cement companies fell 0.8 million tons to reach 10.0 million tons at the end of 2010. Saudi Cement Industry Performance Table 2 - Total Domestic Volume Sales of Cement (thousand tons) 2010 Jan - Nov 2011 Jan - Nov Growth % of Total Domestic Sales Jan - Nov 2011 Yamamah Saudi Cement Co. 4,998 5,442 8.9% 13.3% Saudi Cement Co. 5,389 6,049 12.2% 14.3% Eastern Province Cement 2,664 2,887 8.4% 7.1% Qassim Cement Co. 3,831 3,887 1.5% 10.2% Yanbu Cement Co. 3,536 4,010 13.4% 9.4% Arabian Cement Co. 2,906 3,473 19.5% 7.7% Southern Province Cement 4,803 6,142 27.9% 12.8% Tabuk Cement Co. 1,207 1,455 20.5% 3.2% Riyadh Cement Co. 2,313 3,032 31.1% 6.2% Najran Cement Co. 2,749 2,732 -0.6% 7.3% Al Madina Cement Co. 1,859 1,664 -10.5% 4.9% Northern Cement Co. 1,005 641 -36.2% 2.7% Al Jouf Cement Co. 324 1,061 227.5% 0.9% Total 37,584 42,475 13.0% 100.0% Source: Yamama Cement Total domestic demand for cement improved and recorded a notable YoY growth of 13% in sales volume, reaching 42.5 million tons in the first 11 months of 2011 against 37.6 million tons for the same period last year. Saudi Cement Co. had the highest % of total domestic sales (at 14.3%) followed by Yamama Cement (at 13.3%). Yamama Saudi Cement Co. P a g e | 8
January 2012 KMEFIC Research Equity Analysis Report Table 3 - Total Production of Cement (thousand tons) Yamamah Saudi Cement Co. Saudi Cement Co. Eastern Province Cement Qassim Cement Co. Yanbu Cement Co. Arabian Cement Co. Southern Province Cement Tabuk Cement Co. Riyadh Cement Co. Najran Cement Co. Al Madina Cement Co. Northern Cement Co. Al Jouf Cement Co. Total 5,032 6,231 2,864 3,850 3,516 2,910 4,794 1,228 2,344 2,761 1,864 1,321 415 39,130 5,423 6,529 3,044 3,935 4,024 3,483 6,094 1,429 3,100 2,726 1,684 1,059 1,319 43,849 7.8% 4.8% 6.3% 2.2% 14.4% 19.7% 27.1% 16.4% 32.3% -1.3% -9.7% -19.8% 217.8% 12.1% 12.9% 15.9% 7.3% 9.8% 9.0% 7.4% 12.3% 3.1% 6.0% 7.1% 4.8% 3.4% 1.1% 100.0% Source: Yamama Cement 2010 Jan - Nov 2011 Jan - Nov Growth % of Total Production Jan - Nov 2011 Total cement production of the Saudi cement companies reached 43.8 million tons in the first 11 months of 2011, up 12.1% from the same period last year. Saudi Cement Co. had the highest % of total domestic production (at 15.9%) followed by Yamama Cement (at 12.9%). Figure 3 - Financial performance of Saudi cement companies for the period 9M-2011 (SAR Millions) 1,400 Revenue Operating Income Net Income 1,200 1,000 800 600 400 200 0 Al Jouf Cement Co. Source: KMEFIC Research Arabian Cement Co. Eastern Province Cement Qassim Cement Co. Saudi Cement Co. Southern Province Cement Tabuk Cement Co. Yamamah Saudi Cement Co. Yanbu Cement Co. Looking at the corporate results of Tadawul’s cement industry, , the performance of the nine listed Saudi cement companies was strong during the first 9 months of 2011 (note: Hail Cement was not included in this analysis due to the absence of historical financials as it is a newly listed company). . Total revenue of the nine listed companies reached SAR 7.1 billion for the first 9 months of 2011, growing 18.6% YoY. . Furthermore, operating profit and net income witnessed significant YoY growth of 21.3% and 19.3% respectively, , with total net income of the companies reaching SAR 3.4 billion. The average profit margin of the companies stood at 45.2%, reflecting low energy and raw material costs. Yamama Saudi Cement Co. P a g e | 9
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Page 3 and 4: January 2012 KMEFIC Research Equity
Page 5 and 6: January 2012 Business Profile Yamam
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Page 15 and 16: January 2012 Valuation KMEFIC Resea
Page 17 and 18: January 2012 Appendices KMEFIC Rese

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