Cement companies report mixed results for 1Q 2020

Ongoing pandemic, temporary suspension of building permits have affected demand for cement across Egypt

The Arabian Cement company has announced its revenues for the first quarter (1Q) of 2020 came in at EGP 703m, down 15.1% year-on-year (y-o-y) and 7.2% quarter-on-quarter (q-o-q).
The integration of pet coke into the energy mix resulted in cash savings of EGP 62/tonne on an annual basis. However, cash cost/tonne rose slightly sequentially to EGP 511 compared to EGP 508.
The earnings before interest, taxes, depreciation, and amortization (EBITDA) margin improved in 1Q 2020 to 13.0%, against the 9.8% reported in 1Q 2019. The EBITDA figures reflect a decline from 14.3% in 4Q 2019.
Attributable net income stood at EGP 16m in Q1 of 2020, up 152.6% y-o-y compared to a loss of EGP 4m in the previous quarter. Net debt decreased to EGP 243m against the EGP 852m in Q1 of 2019, and versus EGP 558m in 4Q 2019, down 72% y-o-y and down 56% q-o-q. The company reported net interest expenses decreased by 37.5% y-o-y and 42.3% q-o-q.
Moreover, Misr Beni Suef Cement )MBCC( reported that its revenues for 1Q 2020 declined to EGP 405m, from the EGP 436m in the same period of the previous year. The latest revenues figures reflect a decline of 7.1% y-o-y and 8.6% q-o-q.
The company's EBITDA margin for 1Q 2020 slightly improved to 14.0%, up from the 13.8% in 1Q 2019, and the 13.5% reported in 4Q 2019. Net income rose to EGP 59m, compared to EGP 30m in 1Q 2019 and EGP 13m in 4Q 2019, a 101.0% increase y-o-y and 352.0% q-o-q.
The Misr Cement Company (Qena) reported an increase in its top line to EGP 815.7m compared to EGP 795.1m in 1Q 2019 and EGP 760.9 in 1Q 2019. These figures reflect a rise of 2.6% y-o-y and 7.2% q-o-q.
The company's EBITDA margin improved in 1Q 2020 to 16.7%, compared to 14.4% in 1Q 2019 and 12.2% in 4Q 2019.
Net attributable income came in at EGP 37.9m in 1Q 2020 versus EGP 10.6m in 1Q 2019 and EGP1.4m in 4Q 2019. Profitability improved on the back of lower SG&A spending and financing costs. The company has beaten bottom-line estimates of EGP 5m for fiscal year (FY) 2019/20.
Total cement sales, including local sales and exports, stood at EGP 13.2m in 1Q 2020, up 4.9% y-o-y but down 1.8% q-o-q. The annual increase was partially driven by a recovery in purchasing power in early 2020 coupled with accelerated informal construction activity towards the end of March.
Looking ahead, it is anticipated that cement sales volumes will decline on the back of Ramadan and the Eid Al-Fitr holidays. It is also anticipated that the recent government decision to temporarily suspend the issuance of new building permits will affect cement sales volumes.
Although the decision to not send Egypt into a complete coronavirus (COVID-19) related lockdown has eased pressures on the market, demand is still expected to soften, driven by housing sector spending cuts.
The recent electricity tariff cut will also result in savings of EGP 9-EGP 14/tonne, depending on electricity consumption, which should result in cash cost reduction. It is expected, however, that margins will decline on lower realised cement prices in Q2 of 2020.