Saudi cement companies post major sales growth

Prospects for Saudi cement companies are solid, says brokerage.

Saudi Arabia's cement sector recorded sales growth of 16 per cent in April, the highest in more than a year. The news is a sign confidence in the economy and appetite for projects is increasing.

Domestic cement sales grew to 4.2 million tonnes in April, compared with 3.61 million tonnes in the same period last year, said analysts from NCB Capital. Private projects, notably those for housing and schools, are boosting demand for the basic material. "Last year, people were very wary. The last thing they wanted to do was commit money, but now the outlook is looking brighter," said Farouk Miah, an analyst at NCB Capital in Riyadh. "There is also a lot of activity for plans to develop the rest of the region, in Mecca, Madina and Jeddah," he added. Officials in Riyadh last week instructed the municipality to allocate 19.52 million square meters of land for housing projects in the city and 18 others and townships in the Riyadh province.

The directives follow the decree by King Abdullah in March ordering authorities to build 500,000 low-cost houses in different parts of the kingdom. King Abdullah has allocated 250 billion Saudi riyals to implement the project.

Saudi Arabia is expected to need two million homes by 2014 to keep up with the demands of a population that has quadrupled in 40 years. Shares of cement companies have already had a decent run this year, up an average of 24 per cent on the same period last year and outperforming the country's benchmark Tadawul All-Share Index, which is up 2 per cent in the same period.

"Saudi Cement, Southern Province Cement and Yamama Cement should benefit from the demand because they are the ones who have the biggest spare capacity, an average of 20 per cent," Mr Miah said.

"Smaller cement companies can't benefit because they can't produce much more." Shares of Yamama Cement gained 0.4 per cent to 63.25 riyals, Southern Province cement lost 0.3 per cent to 70.5 riyals, and Saudi Cement was unchanged at 63.75 riyals yesterday.