Saudi Arbian cement hardens against storm

What's Up: Saudi cement companies have protected shareholders from the slump and yielded capital appreciation.

Saudi cement is emerging as an unlikely defensive sector amid tumbling regional and global stock markets.

Analysts at one Saudi investment bank said cement companies in the kingdom had not just protected their shareholders from the pain of the slump but had also yielded them a decent amount of capital appreciation.

While the kingdom's broader market is down by 7 per cent in the year to date, stocks in cement companies have risen more than 20 per cent over the same period.

"The gains in the stock price are a reflection that cement companies are doing well from construction activities in the private sector on solid demand, which will be buoyed further as public infrastructure and housing projects come online," said Farouk Miah, an analyst at NCB Capital in Riyadh.

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.

King Abdullah ordered authorities in March to build 500,000 low-cost houses in different parts of the kingdom. He has allocated 250 billion Saudi riyals to implement the project.

Southern Province Cement yesterday reported a 51.3 per cent increase in profits for the third quarter to 180 million Saudi riyals, beating Mr Miah's estimate by 23 per cent.

On Sunday, Qassim Cement reported a 7.4 per cent increase in net income on better than expected revenues, to 115m riyals, beating Mr Miah's estimate by 5 per cent.

Local press report the company may open a new production line. "Any such increase in capacity could be seen as a potential positive catalyst to the stock," Mr Miah said.

The sector provides generous dividends to investors, with expected yields this year to be about 7 per cent, he said.

Southern Province Cement was up 1 per cent yesterday to trade at 73 riyals a share.

Qassim Cement went down1.5 per cent to 67 riyals. The Saudi Tadawul All-Share Index was down 0.3 per cent to 6,118.62 points.