Google revenue

KSA Business: Saudi Ceramic Q2 hit by lower revenue: Al Rajhi

Saudi Ceramic Company, Saudi Arabia’s largest manufacturer and seller of ceramic tiles, saw second-quarter net profit fall 40.0% year-on-year, impacted by lower revenue and lower gross margins that resulted.

According to Al Rajhi Capital Research, in line with earnings below expectations, net income was also below Al Rajhi’s estimate of SR40 million ($10.65 million).

The company’s revenue in the second quarter of 2022 was SR339 million (-5% YoY) and is likely to have been impacted by lower demand and due to the temporary suspension of some of its factories, following the suspension of gas supplies by Aramco due to maintenance work.

Gross profit falls

The turnover was lower than Al Rajhi’s estimate of SR 363 million. Gross margin fell 23% year-on-year, while operating income fell 47.8% year-on-year, following a gross margin erosion of 734 bps (31.2% at Q2 2022 and 30.8% in Q1 2022).

“We expect that lower revenues, increased competition and higher production costs, due to the increase in certain input costs, have impacted profitability. Lower than expected revenues , moderated by higher than expected non-operating income, were the main reason for this,” said Al Rajhi.

The building and construction segment in Saudi Arabia has been under pressure during the year, although Al Rajhi expects the sector’s performance to improve, helped by stable mortgage drawdowns, a recovery in the execution of giga projects and a favorable development of prices for building materials, which began to fall. .

However, the recovery will likely take time and short-term pressures will likely persist. Al Rajhi also takes into account Saudi Ceramic’s strong market position regionally. Overall, after Q2 2022, Al Rajhi reduces the company’s target price from SR50/share to SR41/share, but raises its rating from “Overweight” to “Neutral”.– TradeArabia Press Service