Arabian Cement Company (ACC) reported its third quarter of 2019’s (3Q19) core losses after minority interest of EGP8m vs Beltone’s estimate of EGP 10m, reversing core earnings of EGP 5m in 3Q18, but unchanged from core losses of EGP 8bn in 2Q19, according to its financials.
This came on an 8% year-over-year (YoY) drop in top line to EGP 744m, compared to a lower decline in cost of goods sold (COGS) of 5% YoY, leading to a contraction of 32% YoY in gross profit declined by 2 ppts YoY. Reported net profits in 3Q19 stood at EGP 8m, versus EGP 2m in 3Q18, driven by foreign exchange (FX) gains of EGP 15m in 3Q19.
Arabian Cement Company is the leading cement producer in Egypt, producing five million tonnes of first quality cement annually, approximately 6% of Egypt’s production. The company is listed in the Egyptian Exchange (EGX) since May 2014.
Arabian Cement Company’s agreement to buy 300,000 tonnes per annum (TPA) of petcoke from Qalaa Holding’s Egyptian Refining Company (ERC). Starting September 2019, the agreement should cover 60% to 70% of its annual coal needs and save customs and environmental tariffs, transportation cost, and other related costs, all of which translate into 22% savings compared to imported coal, on Beltone estimates.
This is in parallel with the 2.5ppt cut in interest rates during 3Q19. This should allow Arabian Cement Company to revert to core profit of EGP 40m by 4Q19, according to Beltone estimates.
Beltone set Arabian Cement Company’s fair value at EGP 6.63, and recommend buying.
Arabian Cement Company is the leading cement producer in Egypt, producing 5m tonnes of high quality cement annually, approximately 6% of Egypt’s production. The company is listed in EGX since May 2014.