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CEMENTSaudi CementAlso known asSCCPriceSR58.5Pricing / Valuation as on May 27, 2009Mkt capSR6.0bn ($1,593.3mn)Sh. outstanding102.0 mnKey statistics52 week range H/L (SR) 129.5/45.5Avg daily turnover (mn) SR US$3m 6.72 1.7912m 7.05 1.88Raw Beta 6m 3yr1.09 0. 90Reuters3030.SEBloombergSACCO ABPrice perform (%) 1M 3M 12MAbsolute (%) (18) 17 (54)Market (%) 6 32 (39)Sector (%) (6) 19 (44)Website: www saudicement com saValuation multiples2006 2007 2008P/E (x) 15.8 18.9 9.3P/B (x) 4.1 4.7 2.0P/Sales (x) 8.4 9.5 4.6Div yield (%) 3.7 3.9 6.2Saudi Cement Company (SCC) was established in 1955 to produce and trade incement products. SCC runs two plants–at Hofuf and Ain Dar– with an annualinstalled capacity of 6.0mn tonnes of cement at the beginning of 2008. In the sameyear, the company produced 5.4mn tonnes of cement and 6.4 mn tonnes of clinker.Company financials2005 2006 2007 2008YoY(%)CAGR(%)(05-08)Net Revenues SRmn 1,116 1,200 1,362 1,260 (7.5) 4.1EBITDA SRmn 604 745 789 713 (9.7) 5.7Net Income SRmn 484 638 686 621 (9.5) 8.7Assets SRmn 2,211 2,705 3,861 4,540 17.6 27.1Equity SRmn 1,970 2,422 2,739 2,848 4.0 13.1Total Debt SRmn - - 695 1,208 73.9 NMCash & Equiv SRmn 290 75 272 31 (88.4) (52.3)EBITDA Mgn % 54.1 62.1 58.0 56.6 - -Net Mgn % 43.4 53.1 50.4 49.3 - -ROE % 24.2 29.0 26.6 22.2 - -ROA % 22.8 26.0 20.9 14.8 - -Div Payout % 75.8 57.6 74.3 57.4 - -EPS SR 23.7 6.3 6.7 6.1 (9.5) -BVPS SR 96.6 23.7 26.9 27.9 4.0 -Source: Company, NCBC ResearchSegment-wise business analysisProduct segment 2007 Geographic 2007%Rev % Net Inc Breakup %Rev % Net IncCement Manufacturing 100.0 100.0 Saudi Arabia 100.0 100.0Weightage (%)TASI (free float weight) 1.15MSCI Saudi (domestic – mid cap) 12.85Free float (%)Free float 86.42Relative share price perf.11,0009,0007,0005,0003,000M ay-08 Aug-08 Nov-08 Feb-09 M ay-09TASITop 5 shareholders (%)15010050Saudi Cement (RHS)General Organization for Social 8.5Insurance (GOSI)Khaled Abdul Rahman Saleh Al Rajhi 7.9Public Pension Authority (PPA) 5.0Source: NCBC Research-Source: Company NCBC Research• Business brief: SCC has been losing ground in the domestic market. This isprimarily due to the rising competition in Central Saudi Arabia and the company’sfocus on the export markets. Consequently, SCC is not the largest cement sellingcompany in Saudi Arabia despite being the largest cement producer in the country. In2008, the company’s share in the country’s total production has fallen to 16.3% from17.4% in the previous year. SCC also has a 36% equity stake in United CementCompany, Bahrain, and holds another 33.3% stake in Cement Product Industry Co.Ltd., which meets the cement packaging requirements of SCC and its partnercompanies.• Financials: SCC’s revenues decreased 7.5% y-o-y during 2008 to SR1,259.6 mn.This could be mainly attributed to the ban on cement exports, implemented in SaudiArabia during June 2008. EBITDA margin stood at 56.6% in 2008, a 136 basis pointsdecline y-o-y. The company’s net margin has also slid marginally to 49.3% in 2008from 50.4% in the previous fiscal year.• Recent developments: SCC’s Q109 net profit declined 12.3% y-o-y to SR152 mn asthe government had introduced a ban on cement exports to ease supply bottlenecks.In April 2009, SCC announced the commencement of commercial operations of twonew production lines with a combined annual output of 6.6 mn tons.JUNE 2009SAUDI CEMENT COMPANY138