CEMENT

BUOYANT SAUDI CONSTRUCTION SECTOR FUELS CEMENT BOOM

Sales growth in Saudi’s cement sector in the first month of 2021 has underscored the expansion in the country’s construction activity.

Yamama Cement Company data shows production of 17 Saudi cement companies rose 6% to 5.1 million tonnes in January. Around 12 producers reported higher sales, led by Arabian Cement Company, which saw its sales jump 50%, while Najran Cement and Tabuk Cement each posted a 25% growth during the same period.

January’s performance builds on a strong 2020 for Saudi cement companies, which remained resilient despite the challenges of COVID-19. The country’s overall cement sales rose 21% to 51 metric tonnes last year, compared to 42 metric tonnes in 2019, according to Global Cement.

Here’s how some of the kingdom’s cement companies fared last year:

Saudi Cement Co. saw its net profit rise just over 1% to SAR 456 million, a remarkable achievement in a difficult year for the domestic and global economy. The company’s sales stood at SAR 1.57 billion, an 8.9% increase over 2019.

Other Saudi cement companies saw impressive jumps in net income, with Southern Province Cement Co.’s net profit rising 31.5% to SAR 609 million, on sales of SAR 1.65 billion.

Eastern Provincial Cement Co. saw its net profit rise nearly 20% during the year to SAR 217 million on the back of a decrease in the cost of sales and administrative and general expenses. The company’s sales stood at SAR 742 million for the year.

Yanbu Cement Co.’s net profit rose around 9% to SAR 281 million on sales of SAR 940 million, according to a filing on the Tadawul website.

However, Arabian Cement Co. saw its net profit decline to SAR 184.9 million, an 11.4% drop over 2019. Sales, however, rose 11.5% higher during the year to SAR 871.9 million.

Similarly, Umm Al-Qura Cement Co. saw its net profit jump 47.4% during the year, as sales climbed to SAR 333.33 million.

Tabuk Cement Co.’s net profit soared 113% on sales of SAR 276.5 million. City Cement Co. registered sales of SAR 572 million last year, netting a profit of SAR 220.5 million, an increase of nearly 16%.

Yamama Cement Co. grew its net profit by 41.7% to SAR 363,000, on sales of SAR 880,000 during the period.

Najran Cement Co. also saw strong growth during the year, with net profit surging 282% in 2020 to reach SAR 204,300 on sales of SAR 623,200.

CONSTRUCTION SECTOR GROWTH

The cement industry’s growth reflects the brisk activity witnessed in the construction sector. 

Construction accounted for 6.7% of GDP in the third quarter of 2020, making it the sixth largest segment of the economy.

The sector managed to eke out a 0.2% GDP growth during the period, year on year, according to third quarter data from the Saudi General Authority for Statistics. In the third quarter, construction saw a 5.6% jump compared to the second quarter.

New mega projects such as NEOM City and Red Sea Development Company (RSDC), both rising on the kingdom’s western coast, are expected to lead to a further surge in construction activity. 

In March, the RSDC awarded contracts to Saudi company Al Bawani and Swiss firm Blumer Lehmann to support the development plans and structural work of its luxury hotels and resorts. 

The two companies will lead the construction of hotels across The Red Sea Project, with Al Bawani responsible for civil and structural works across 40 hotel villas on the Southern Dunes site, and Blumer Lehmann responsible for timber construction planning and fabrication as well as supply works for a hotel situated on Ummahat Al Shaykh Island.

“The Red Sea Project has already passed significant milestones and work is on track to welcome the first guests by the end of 2022, when the international airport and the first four hotels will open,” according to the company. “The remaining 12 hotels planned for phase one will open in 2023.”

When fully complete, the destination will feature 50 resorts, comprising 8,000 hotel rooms and around 1,300 residential properties across 22 islands and six inland sites.

Another project that will keep contractors, cement producers and the construction sector busy is The Line, which is being developed within NEOM City. The 170-kilometre, high-tech city will preserve 95% of nature within NEOM, with zero cars, zero streets, and zero carbon emissions. 

Construction of the project will begin immediately, with special focus on state-of-the-art transit and artificial intelligence. It will feature residences, mixed-use development, schools, medical clinics, leisure facilities, as well as green spaces.

These projects are just the tip of the iceberg. With the transformative Saudi Vision 2030 initiative now in full swing, virtually every sector of the economy will require new buildings, infrastructure and spaces to meet their ambitious targets.