The Suez Cement Company has reported weak results in the first quarter (Q1) of 2020 with its net loss recording EGP 291m.
The quarterly figures compare to a loss of EGP 644m, or a recurring loss of EGP 260m, in Q4 of 2019 and a profit of EGP 177m in Q1 of 2019.
Revenue amounted to EGP 1.3bn, down 14.0% quarter-on-quarter (q-o-q) and 26.7% year-on-year (y-o-y). The company’s disappointing results, come on the back of a sharper than expected drop in cement prices and higher direct costs.
Cement prices were down 9.3% q-o-q and 31.9% y-o-y, with sales volumes declining 5.2% q-o-q and increasing 7.6% y-o-y. The company’s continuation of bottom-line losses comes as demand for cement dropped significantly starting March. This has added further pressure to Egypt’s already oversupplied cement sector, with a reported excess capacity of over 40%.
Naeem Research expects SCC to report even weaker results in Q2 of 2020 due to the containment measures and seasonality (as Q2 coincided with Ramadan and the extended Eid Al-Fitr holidays). According to industry dispatch indications, sales volumes in May 2020 indicate a drop of 31% m-o-m and 27% y-o-y.
The company’s only respite could come in the form of the monetisation of its 600,000 sqm land which were old production lines in Torah. However, there are delays expected, given the aftermath of the global coronavirus (COVID-19) pandemic.
“While we do expect some recovery in demand during the second half of the year following the recent government decision to ease lockdown restrictions, we, however, still expect 2020 to be an extremely difficult year for the cement industry in Egypt, which was already suffering from a supply glut, with excess capacity of more than 35mtpa, as demand growth fails to catch up,” according to Naeem Research.