Southern Province Cement Company: MEED assessment

03 January 2013

SPCC has confidence in the future demand for cement in the Saudi market

As the kingdom’s biggest cement producer, and with the third-highest clinker inventory, SPCC is well-positioned to take advantage of the increasing demand for cement in Saudi Arabia.

This helped SPCC record a 35 per cent growth in net profits in 2011, rising to SR888m from SR659m in 2010. The company’s growth has continued into 2012, with estimated net profit for the first nine months touching SR747m, an increase of 15.8 per cent from SR645m recorded for the same period in 2011.

The company’s decision to build new lines at two of its three plants is evidence that it has confidence in the future of the domestic market and is willing to capitalise on the growth.

Saudi Arabia’s significant activity in its construction sector is set to continue, with the government pledging in its ninth five-year development plan (NDP), approved by King Abdullah bin Abdulaziz al-Saud in 2010, to spend $385bn on infrastructure development by 2015.

NCB Capital expects the government construction programme to drive an increase in sales of 8.2 per cent in 2013 to reach 56 million tonnes. It expects the sector to continue to grow at an average rate of 6.3 per cent a year to 2015.

The main challenge for SPCC will be ensuring that it can successfully agree fuel allocations from state oil firm Saudi Aramco to run its power plants.

Although production started at its Tahama plant earlier in 2012, SPCC has yet to conclude a deal with Aramco to supply fuel for the site. Problems with fuel allocations in the future could delay capacity additions and reduce SPCC’s ability to capitalise on the buoyant domestic construction sector.

But if SPCC is able to gain fuel allocations, its strategy of increasing capacity and high stock levels should enable it to further boost profits in the years to come.

Southern Province Cement Company Profile

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