Displaying items by tag: Hail Cement
Update on Saudi Arabia
25 April 2018No consolidation has happened yet in the Saudi Arabian cement industry but exports have started to be announced. Yanbu Cement signed an export deal in March 2018 to despatch 1Mt of clinker and 0.5Mt of cement from one year from 1 April 2018. Prior to that, Al Jouf Cement Company started a contract to export 72.000t/yr to Jordan from late February 2018. Earlier still, Bahrain was expected to benefit from a lifting of cement export tariffs at the end of January 2018.
Its early days yet but some of sort of action is starting to happen about the country’s falling cement sales. If export deals are in the early stages of being set following the lifting of the ban, then local movements of cement have intensified. As Al Rajhi Capital reports in its latest market update, that producers have been forced by low sales and high inventory levels to take action. It says that cement companies have started to sell products in different parts of the country than they do normally leading to a ‘price war’. The financial services and analytical company has pinpointed the central region as the key battleground as company market shares have fallen over the last six months as northern producers have moved in.
Graph 1: Cement sales (Mt) by quarter in Saudi Arabia, 2015 to March 2018. Source: Yamama Cement.
Cement sales fell by 15% year-on-year to 11.8Mt in the first quarter of 2018 from 13.7Mt in the same period in 2017. This is the first time in recent years that sales did not rise from the fourth quarter to the following first quarter. Not a good sign. Despite the bad news, a few producers did mange to increases their deliveries in the first quarter, including Saudi Cement, Hail Cement, Umm Al Qura Cement and United Cement.
Bizarrely, into this sales environment, plans for the long delayed Al Baha Cement cement plant project have re-emerged. The project previously has received coverage at various stages over the years. This time it has reportedly gained a licence to set up the company and it hopes to start tendering for the build in the second half of 2018. The investors may want to leave it a little longer given the current state of the Saudi cement industry.
Hail Cement renews power plant operation deal with Wärtsilä
16 February 2018Saudi Arabia: Hail Cement has renewed its three-year asset management agreement with Finland’s Wärtsilä for the power plant at its Turbah plant. Wärtsilä provides guarantees for the performance of the power plant and ensures the reliability and availability of its operations. The operations of the power plant are remotely monitored from a Wärtsilä Expertise Centre for real-time data gathering and analysis. The agreement, signed in November 2017, is already the second renewal of Wärtsilä’s service agreement for the power plant in Turbah, the first agreement being signed in 2012.
“Wärtsilä has been responsible for the full operation and maintenance of our power plant in Turbah for about six years now. We have been satisfied with its flexibility, quality of service and emphasis on safety, and are happy to continue our co-operation with them,” said Matar Al Zahrani, chief executive officer (CEO) of Hail Cement.
The agreement covers the operation and maintenance of Hail Cement Factory’s power plant, including the day-to-day operation of the power plant, preventive and predictive maintenance as well as plant operations manpower, health and safety management. The 53MW base load power plant is equipped with seven Wärtsilä 32 engines and provides energy for Hail Cement Company’s cement factory as well as for the nearby residential area.
Update on Saudi Arabia
25 October 2017Arabian Cement Company had some choice words for a contractor this week when it blamed it in a bourse statement for a delay for a new mill at its Rabigh plant. The project has been pushed back to the third quarter of 2018 from the fourth quarter of 2017. The second phase of the plan, to build a new clinker production line, has also been placed under review.
The contractor may have given Arabian Cement an excuse to put a question mark over its new line, but the market reality has been stark. Also this week, Saudi Cement Company reported that its net profit had fallen by 51.5% year-on-year, to US$92.3m in the first nine months of 2017 compared to US$190.4m in the previous period. It blamed falling sales.
Graph 1: Cement sales (Mt) by quarter in Saudi Arabia, 2015 to September 2017. Source: Yamama Cement.
As Graph 1 shows, cement sales volumes in Saudi Arabia have been dropping since 2015. Sales fell by 5.3% year-on-year to 10.5Mt in the third quarter of 2017 from 10.9Mt in the same period in 2016. Year to date figures show a worse trend with a drop of 17.4% to 35.2Mt in the first nine months of 2017 compared to 42.7Mt in the same period in 2016. This decline has accelerated compared to a decrease of 5.4% from 45.1Mt in 2015 for the first three quarters.
Analyst Al Rajhi Capital provided some context to this situation in its September 2017 report on the August 2017 sales figures. It reported particularly steep declines in cement sales volumes of over 35% for Northern Cement, Najran cement and Hail Cement for the first eight months of the year. However, some producers - including City, Qassim, Yanbu and Al Safwa - did manage modest gains. Overall though the financial services company did not expect any pickup for the second half of 2017.
Last time this column covered the kingdom’s cement industry in early 2016 it asked when the government was going to relieve the export ban. Cement production was high, inventory was pilling up and infrastructure spending was falling. The ban was subsequently lifted but commentators worried that it would be too restrictive to have much effect due to tariffs and volume restrictions. A steady stream of cement producers has applied for export licences since then, but exports have not alleviated the situation. With inventory remaining high for the producers, current export policy failing to help and the local construction market subdued, it is unlikely that anything is going to change soon for the local cement industry. In fact it may even get worse if the government decides to revise its energy price policy later in 2017 or in early 2018, adding to the input cost burden of the producers.
Talk of market consolidation in this kind of market environment seems inevitable. This is exactly what happened earlier in the month when Jihad Al Rashid, the head of the Saudi National Committee for Cement Companies, said to local press that the local market only needed four large cement producers rather than the 17 companies it has at present. The question at this stage seems to be when, rather than if, will this process start.
Saudi Arabia: Hail Cement has appointed Abdul Aziz Bin Saad Al Saud as its chairman. The move follows the resignation of Saud Bin Abdul Mohsen Al Saud in the role, according to Reuters.
Hail Cement Company secures export licence
19 May 2017Saudi Arabia: Hail Cement Company has obtained an export licence from the Ministry of Commerce and Investment. The licence is valid for one year from the date of issue. No significant financial impact is expected upon the financial results of the company.
Saudi cement firms see net profit rise by 6% in 2014
30 January 2015Saudi Arabia: The combined net profit of the Saudi cement firms rose by 6% in 2014 to reach US$1.56bn compared with US$1.48bn recorded in 2013. The profit during the October - December quarter grew by 31% to US$383m compared with US$293m during the same period in the previous year.
The net profits of seven firms, out of 14 listed companies, grew. The profits of six companies dropped in 2014 and one company, Um Al-Qura, registered a net loss.
Arabian Cement Company (ACC) registered the biggest profit, with its profits reaching US$172m compared to US$51.0m in 2013, an increase of 236%. The company attributed the surge in profits to a growth in sales, which reached US$457m in 2014, compared with US$361.6m in 2013.
ACC was followed by Hail Cement Company (HCC), which was the second biggest booster for the sector. Its profits reached US$39.1m in 2014 compared to US$13.3m in 2013, increasing by 191%.
The profits of six companies dropped in 2014 and this negatively affected the sector's profit growth for the year. The profits of Yamama Cement Company (YCC) fell by 23%, followed by Saudi Cement Company (SCC), the profit of which fell by 8% year-on-year.
Update on Saudi Arabia
06 November 2013Demand for cement is so intense in Saudi Arabia that certain producers have reported production line shutdowns in dedicated stock market statements. Notably, industry newcomer Hail Cement reported a scheduled shutdown for late October/early November 2013, Al Jouf Cement reported unscheduled shutdowns in October and June 2013 and Najran Cement reported scheduled maintenance in July 2013. Even a short delay to cement production is a newsworthy event for both investors and analysts.
Saudi cement producers have risen to the infrastructure challenges of the country's Ninth Development Plan, increasing cement production by 6% year-on-year to 42.7Mt for the first nine months of 2013. In this febrile environment, the king ordered 10Mt of cement imports in April 2013 followed by government demands for producers to build up a two-month 'strategic' inventory reserve. Unsurprisingly, as we report this week, exports of cement from Saudi Arabia have fallen by 55% for the first nine months of 2013.
At the time of Global Cement's feature on Saudi Arabia in December 2012 only two of the country's cement producers had an inventory of joint clinker and cement stock meeting the government's stockpiling request. For the first nine months of 2013 the situation remains the same although the overall inventory has increased by 18% year-on-year to 10.3Mt. This compares to the end of 2012 where inventories fell year-on-year by 14% to 7Mt.
Unsurprisingly again, the Kingdom's major cement producers have seen balance sheets bulge so far in 2013. Yamama Cement reported a 12% year-on-year rise in net profit to US$145m for the first half of 2013 on the back of local demand. Saudi Cement Company reported a 5% year-on-year rise in its net profits to US$173m and Southern Province Cement saw a 4% year-on-year rise in its net profits to US$150m for the same period. Yanbu Cement saw its net profit rise by 29% year-on-year to US$176m for the first nine months of 2013.
With more large government infrastructure contracts pending, analysts expect the Saudi cement market to remain heated. Although as NCB Capital pointed out in September 2013, uncertainties over fuel supplies for coming cement plant expansions provide uncertainty to the situation. Nobody wants a repeat of the Yanbu - Aramco spat over fuel supplies that occurred in 2011. Irony would barely describe the situation if a Saudi Arabian cement boom was dented by a lack of fuel in one of the countries with the biggest oil reserves in the world.
Global Cement will be at stand T9 at the 18th Arab-International Cement Conference and Exhibition in Jordan from 11 – 13 November 2013
Saudi Arabia: Hail Cement Company has announced that a scheduled shutdown for its production line for kiln and raw mill maintenance will run from 26 October 2013 to 11 November 2013. The cement mills and packing plant will remain operational throughout this period. The financial impact this shutdown will be reflected in the income statement for the fourth quarter of 2013. The company's commitments to its customers are not expected to be effected.
Hail Cement loss deepens in 2013
29 May 2013Saudi Arabia: Hail Cement has booked a US$3.7m net loss for the first quarter of 2013, more than double the loss of US$1.7m suffered in the first quarter of 2012. Without providing any exact figures, the company attributed the loss to higher expenses related to launching production, coupled with higher salary costs due to the growing number of employees.
Hail Cement, established in 2010, is yet to start commercial production. According to the current plans, this is expected by the end of the second quarter of 2013. In February 2013 Hail Cement said that its rotary cement kiln had started trial production and that the trial operations were expected to take three months.