Finance & Capital Market

Najran profit drops 34pc as revenue remains under pressure

Saudi-based Najran Cement Company’s gross profit dropped by 34% y-o-y, while operating profit plunged 52.3% y-o-y on lower revenue and the resultant fall in operating leverage in the second quarter of 2022. 
Gross margins fell to 28.5% for Q2 2022, compared to 35.5% a year back, according to Al Rajhi Capital Research.
Revenue falls 17.9pc
The company registered a revenue of SR108 million ($28.75 million), a y-o-y fall of 17.9%, and was attributed to a 6.6% y-o-y fall in cement volume, and lower average realisation. However, the revenue was higher than Al Rajhi’s estimate of SR98 million, due to higher-than-expected cement volume, even as the realisation was broadly in line with expectations. 
For Q2 2022, the cement volume of Najran Cement fell by 6.6% y-o-y, close to the industry performance, which on an average fell by 6.4%, but was better than the performance of the Southern region, which registered a fall of 13.2%. 
Cement volume for the period was impacted by lower construction activity, though Al Rajhi feels that the cement volume fall has reached the bottom and expect the performance to gradually improve. 
“We expect the sector performance to improve, aided by stable mortgage offtake and favorable movement of construction material prices, which have started to fall. We also expect the average cement realisations of Najran Cement to remain at these levels. Overall, we reduce our target price to SR15/share from SR17/share and maintain our rating at Neutral,” Al Rajhi said.--TradeArabia News Service