The Misr Beni Suef Cement Company has reported a profit of EGP 29.5m during the second quarter (Q2) of 2020, bringing its total revenues to EGP 216m.
The results for Q2 of 2020 show a profit growth of 84% compared to Q2 of 2019, which stood at EGP 16m. The company reported a 94% profit increase to EGP 88.77m in the first half (H1) of 2020, versus profits of EGP 45.66m in the same period in 2019.
The gross margin improved 2.5pps q-o-q and 1.8pps y-o-y to 5.3%, amounting to 5.3% as raw material costs, including imported coal and energy, declined during Q2 of 2020.
However, the results show a revenue decline of 47% quarter-on-quarter (q-o-q) and 52% year-on-year (y-o-y). The company noted that the downturn in revenues was impacted by significantly weaker cement sales volumes for the quarter.
Naeem Research expects other income items, including investments, to have also contributed to the much higher profit.
Cement sales volumes (including exports) dropped 47% q-o-q and 53% y-o-y, according to industry dispatch indications. Revenue per tonne of cement stood at EGP 641, marking an improvement of 1% q-o-q and 0.3% y-o-y.
Misr Beni Suef’s weak cement sales came against the backdrop of continued industry oversupplies, exacerbated by the novel coronavirus (COVID-19) pandemic. These were also affected by the unfavourable seasonality due to Ramadan and the Eid Al-Fitr holidays, when construction activity normally slows down.
However, the company’s sales were supported by a strong balance sheet, reflecting net cash of about EGP 900m. Misr Beni Suef Cement remains as one of the few profitable cement producers in Egypt. Naeem Research maintains its recommendation as a BUY, with a target price of EGP21.6/share