Amouna 3

Global Research Sector
Saudi Arabia
Saudi Arabia Cement Sector

Signs of concrete growth.... November 2007
Global Investment House KSCC
Sector Research
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13149 Kuwait
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Email: research@global.com.kw
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Omar M. El-Quqa, CFA

Executive Vice President
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Phone No:(965) 2400551 Ext.104
Faisal Hasan, CFA

Head of Research
fhasan@global.com.kw
Phone No:(965) 2400551 Ext.304
Arvind S. Desai
Senior Financial Analyst
adesai@global.com.kw
Phone No:(965) 2400551 Ext.422
Bikash Rout
Financial Analyst
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Phone No:(965) 2400551 Ext.254
Dr. Sandeep Gupta

Financial Analyst
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Phone No:(965) 2400551 Ext.504
Table of Contents
Investment Summary 1
Saudi Arabian Economic Profile 6
Saudi Arabia Cement Industry 9
Peer Group Comparison 17
Valuation and Recommendation 20
Players Profile 22
Arabian Cement Company 23
Eastern Province Cement Company 31
Qassim Cement Company 39
Saudi Cement Company 46
Yanbu Cement Company 54
Yamama Saudi Cement Company 62
Southern Province Cement Company 69
Tabuk Cement Company 76

Global Research - Saudi Arabia Global Investment House

Outlook: POSITIVE
Investment Summary
- The GCC cement sector has seen good growth in recent years. A host of factors have
seen huge investment inflow into the real estate sector of most GCC countries in recent
months. This has positive implications for the GCC cement sector. The Saudi cement
demand is projected to grow at an annual rate of more than 10% during 2007-’10, one of
the highest in the GCC region.
- The Saudi economy has been experiencing high growth over the last four years. The
nominal GDP of the Kingdom grew at a CAGR of 16.5 per cent over 2002-’06; in real
terms, the CAGR was 5.9 per cent. This growth has been driving boom in construction
sector, hence the increased demand for cement.
- The aggregate profit of listed cement companies in Saudi Arabia reached SR3.68bn in
2006, up 18.2% from SR3.11bn reported in the previous year. The highest growth was
registered in Eastern Province Cement which reported 49.1% growth in net profit in
2006.
- During 2006, cement production rose to 27.03mt as compared to 26.03mt in 2005.

Domestic deliveries stood at 24.7mt as compared to 24.4mt in 2005. Saudi Cement
achieved the highest production numbers, clocking 5.0mt in 2006.
- The current combined total capacity for clinker and cement of these eight companies is
28.5 million tonnes (mt) and 33.1mt respectively. Yamama Cement (YSCC), with clinker
and cement capacities of 6.0mt and 6.5mt respectively, was the biggest cement company
as per latest figures.
- The total production of clinker and cement in the Kingdom in 2006 was 23.8mt and
27.0mt respectively, 7.5 per cent and 3.7 per cent higher, respectively, over 2005. The
production of clinker and cement in the Kingdom grew at a CAGR of 2.4 per cent and
3.9 per cent, respectively, during 2003-’06. For the first nine months of 2007, the total
production of clinker and cement was 20.2mt and 23.2mt respectively.
- On the back of healthy demand, average realizations for all the companies rose during
2006, continuing the uptrend of the previous years. The weighted average realization for
all the eight companies combined was SR239.4/tonne, up 8.6 per cent over SR220.4/
tonne in 2005.
- The performance of the companies improved during 2006, with revenues increasing to
SR6.5bn, up 12.5 per cent, and net profits increasing to SR3.7bn, up 18.2 per cent, over
the previous year. The revenues and net profits of the eight companies grew at a CAGR
of 11.5 per cent and 14.9 per cent, respectively, during 2003-’06.
November 2007 Saudi Arabia Cement Sector

- The strong performance of the Saudi listed cement companies seems to be continuing
into 2007 as well. Results for first nine months of 2007 for the companies suggest that the
revenues have grown by 17.8 per cent y-o-y, whereas the net profit has grown by 21.4 per
cent y-o-y. This could well be a pointer to another year of robust performance for these
companies in 2007.
- Saudi Cement, SPCC and Yamama were the leading companies in terms of value of sales
in 2006. The three companies together accounted for close to half of the total revenues
and net profits of all the eight listed companies that year.
- The eight listed companies had a lackluster performance at the Saudi Stock Market
(Tadawul) during last 12 months, which was in line with the massive correction across
the board in Tadawul. All the eight stocks were down for most part of the last 12 months.
However the stocks have improved in recent months. Tadawul was the worst performing
market among all the stock markets in GCC in the last 12 months. Tadawul All Stock
Index (TASI) has gained only 2.3 per cent in last 12 months to November 6, 2007.
- We maintain a ‘Positive’ outlook on the Saudi cement sector in the medium-term, driven,
mainly, by expectations of sustained growth in revenues, owing to a plethora of big ticket
infrastructure and real estate projects identified/announced currently underway all across
the Kingdom, and sustainable profit margins.
- We are updating our coverage of the Saudi cement sector with full valuation of six out of
the eight cement companies in this report. We recommend a ‘BUY’ on Eastern Province
Cement and Yanbu Cement. For the other four companies, we recommend a ‘HOLD’.
Our recommendation on Saudi cement companies is tabulated below.
Table 01: Saudi Arabia Cement Sector - Recommendation Summary

Name of the Current Target Reco. % upside BVPS EPS P/BV P/E
Company Price (SR) Price (SR) (downside) (SR) (SR)
Arabian Cement 93.0 91.0 HOLD -2.2% 29.0 6.1 3.2 15.2
Eastern Cement 80.5 102.2 BUY 27.0% 17.9 6.7 4.5 12.0
Qassim Cement 145.0 157.9 HOLD 8.9% 33.2 10.9 4.4 13.2
Saudi Cement 100.3 104.6 HOLD 4.3% 24.4 6.7 4.1 15.0
Yanbu Cement 82.0 96.9 BUY 18.1% 21.6 6.9 3.8 11.8
Yamama Cement 79.0 85.3 HOLD 8.0% 16.9 5.7 4.7 13.8
Southern Cement* 77.5 -- NR -- 13.7 4.5 5.3 16.4
Tabuk Cement* 33.3 -- NR -- 12.0 3.1 2.7 10.4
Based on 2007 earnings and current market prices as on 6th Nov 2007
*2006 figures. NR – Not Rated
Source: Global Research
Saudi Arabia Cement Sector November 2007

Chart 01: Performance of ACC Vs TASI and Cement Index

3.40
3.20
3.00
2.80
2.60
x change in value
2.40
2.20
2.00
1.80
1.60
1.40
1.20
1.00
0.80
Aug-04 Dec-04 Apr-05 Aug-05 Dec-05 Apr-06 Aug-06 Dec-06 Apr-07 Aug-07 Oct-07
Cement Index TASI Arabian Cement

Source: Tadawul
Chart 02: Performance of EPCC Vs TASI and Cement Index

3.40
3.20
3.00
2.80
x change in value
2.60
2.40
2.20
2.00
1.80
1.60
1.40
1.20
1.00
0.80
Cement Index TASI EPCC

Source: Tadawul
Chart 03: Performance of QCC Vs TASI and Cement Index

5.00
4.50
4.00
x change in value
3.50
3.00
2.50
2.00
1.50
1.00
0.50
-
Cement Index TASI Qassim

Source: Tadawul

Chart 04: Performance of SCC Vs TASI and Cement Index

3.40
3.20
3.00
2.80
2.60
x change in value
2.40
2.20
2.00
1.80
1.60
1.40
1.20
1.00
0.80
Cement Index TASI Saudi Cement

Source: Tadawul
Chart 05: Performance of YCC Vs TASI and Cement Index

3.40
3.20
3.00
2.80
2.60
x change in value
2.40
2.20
2.00
1.80
1.60
1.40
1.20
1.00
0.80
Cement Index TASI Yanbu

Source: Tadawul
Chart 06: Performance of YSCC Vs TASI and Cement Index

3.40
3.20
3.00
2.80
2.60
x change in value
2.40
2.20
2.00
1.80
1.60
1.40
1.20
1.00
0.80
Cement Index TASI Yamama

Source: Tadawul

Chart 07: Performance of SPCC Vs TASI and Cement Index
3.50
3.00
x change in value
2.50
2.00
1.50
1.00
0.50
-
Cement Index TASI SPCC

Source: Tadawul
Chart 08: Performance of Tabuk Vs TASI and Cement Index

3.40
3.20
3.00
2.80
2.60
x change in value
2.40
2.20
2.00
1.80
1.60
1.40
1.20
1.00
0.80
0.60
Cement Index TASI Tabuk
Source: Tadawul

Saudi Arabia Economic Profile

Strong economy driven by oil money…
After entering the WTO, the next big things coming out of the Saudi economy are the
mammoth projects of economic cities which are going to have a long-lasting impact on the
macro-economic policies and on the fundamental structure of the Saudi economy. Saudi
economy has been doing exceptionally well in the last few years led by oil-driven growth.
Saudi Arabia’s nominal Gross Domestic Product (GDP) is estimated to have grown by 10.6%
in 2006 to reach SR1,307.5bn (US$348.6bn) while real GDP is estimated to have grown by
4.3% to SR798.8bn (US$212.9bn). Mining and quarrying sector accounted for the major part
of GDP, forming 50% of GDP in 2006, and recorded the highest y-o-y increase, growing
by 14.8%. Transport, storage and communication sectors formed 3.2% of GDP in 2006 and
grew by 7.6% on a year on year basis. Although dominated by oil sector, the government
intends to diversify the economy and use it as a base for employment creation.
Table 02: GDP by Type of Economic Activity

(SR bn) 2001 2002 2003 2004 2005 2006*
Agriculture, Forestry & Fishing 35.7 36.1 36.5 37.2 38.3 39.4
Mining and Quarrying : 230.3 236.9 294.1 384.5 571.0 655.5
Crude Petroleum & Natural Gas 227.6 234.2 291.3 381.6 568.0 652.3
Other 2.6 2.7 2.8 2.9 3.0 3.1
Manufacturing: 69.2 73.0 86.3 95.8 110.7 123.9
Petroleum Refining 19.4 20.4 29.7 32.4 39.5 43.7
Other 49.9 52.5 56.5 63.4 71.3 80.2
Electricity, Gas and Water 8.9 9.3 9.9 10.4 11.0 11.7
Construction 43.2 44.7 47.1 51.1 54.9 59.1
Wholesale & Retail Trade, Restaurants & Hotels 49.8 51.7 53.9 58.1 62.8 67.9
Transport, Storage & Communication 30.6 31.9 33.2 35.7 38.4 41.4
Finance, Insurance, Real Estate & Business Services 78.9 82.1 85.8 91.2 97.8 104.8
Ownership of Dwellings 43.9 45.0 46.0 48.0 50.0 52.2
Other 34.9 37.1 39.9 43.3 47.8 52.6
Community, Social & Personal Services 23.1 24.1 25.1 26.5 27.9 29.2
Less: Imputed Bank Services Charge 14.0 14.7 15.2 16.0 16.7 17.6
SUB - TOTAL 555.6 575.2 656.6 774.6 996.0 1,115.3
Producers of Govt. Services: 123.6 124.5 139.9 155.4 176.4 181.2
Total except Import Duties 679.2 699.7 796.6 929.9 1,172.4 1,296.5
Import Duties 7.1 7.4 8.1 8.8 10.1 11.1
Gross Domestic Product (GDP) 686.3 707.1 804.6 938.8 1,182.5 1,307.5
Source : SAMA * Provisional
More attention towards human resource development…

In 2007 budget, the government continued to pay special attention to impart quality education
and improving the technical and managerial skills of its nationals. This can be seen in the
increased allocation towards human resource development which increased to SR96.7bn as
compared to SR87.2bn allocated in the 2006 budget. We believe that increased government
expenditure is a step in the right direction as it will equip the nationals in taking up jobs
or start their own business and take advantages of the growth in the economy. This is also
important in the wake of small and medium enterprises which are the booming in the country
as a trickle down effect of the huge expenditure by the government and the private sector.

Abundant liquidity…
The Saudi economy has enjoyed a strong liquidity position as can be seen in the 19.3%
y-o-y increase in Money supply (M3) in 2006. This was mainly on the back of the 37%
in time and savings deposits. The increase in interest rates combined with the correction
in stock markets encouraged investors to move their investment in safer time deposits in
banks which led to strong rise in the time and saving deposits. Saudi Arabia’s money supply
continued to accelerate in 2007 also as evident from the fact that it was SR744.1bn at the end
of September’07 from SR709.3bn in the second quarter of 2007, a q-o-q increase of 4.9%.
Saudi Arabia’s year-on-year rate of inflation climbed to 4.9% in September’07 from 4.4% in
August’07. Housing shortages in Saudi Arabia’s major cities continue to boost housing costs.
The weakness of the dollar, to which the Saudi Riyal is pegged, against most major currencies
has also boosted the cost of some imported goods. Given persistently strong domestic demand,
rising rents and higher prices for most commodities, as well as the weakness of the Saudi
Riyal against the Euro, consumer prices have resulted in average inflation of more than 4%
this year.
Surplus despite heavy capital spending…

Trade balance recorded a surplus of US$146.6bn in 2006, registering an increase of 16.8%.
The current account balance increased to US$98.9bn in 2006 as compared to US$89.9bn
recorded in the previous year. One thing that emerges out of the picture is the strong growth
in the imports which is indicative of the strong economic activity in the country. With the
strong growth in capital spending and industrial activity, the country has been increasing its
imports of capital goods.
Building cities to house economic growth…

The Kingdom’s ambitious plan to dramatically raise investment competitiveness under its
“10 x 10” program to put Saudi Arabia among the world’s top 10 globally competitive
investment destinations by 2010 can be best seen in the “Economic Cities” announced in
recent times. According to Saudi Arabian General Investment Authority (SAGIA), the four
cities are expected to attract investments worth more than SR300bn and create more than a
million jobs within the next 10 to 20 years. In the field of balanced regional development,
SAGIA, supported by the Custodian of the Two Holy Mosques and the Crown Prince,
launched three integrated economic cities in 2006, one each in Hail, Madinah and Jazan.
In 2005, King Abdullah Economic City in Rabegh was launched. Studies are underway to
establish two new economic cities in the Northern and Eastern regions to achieve balanced
development all over the country. With the strong liquidity and increased investors’ interest
to park their funds within the country, real estate sector has got a big boost.
Privatization at a rapid pace…

Privatization is going on at a rapid pace in infrastructure and utilities services and government
invited private and foreign investors to be part of country’s economic growth. To develop
Independent Water & Power Projects (IWPP), Water & Electricity Company (WEC) was
established by the Supreme Economic Council to promote private investments in the IWPPs.
Marafiq is also planning an IWPP in the industrial city of Jubail with an estimated cost of
SR9.4bn (US$2.5bn). As per SAGIA, overall power capacity in Saudi Arabia is forecasted

to grow to 59,000 MW by the year 2024 requiring an estimated investment of SR430bn

(US$115bn). To achieve this target the ministry will have to present several joint projects
to the private sector, local and foreign, in order to increase power generation capacity.
Saudi Arabia’s Communications and Information Technology Commission (CITC) has also
liberalized the telecom sector through the offering of the Kingdom’s second fixed-line phone
license and third mobile phone license to foreign investors.
(For a detailed analysis of the Saudi economy please refer to our “Saudi Economic and
Strategic Outlook”)

Saudi Arabia Cement Industry

Cement Capacities, Production and Sale
The cement sector in Saudi Arabia consists of eight listed companies. All of these listed
companies have integrated plants. The current combined total capacity for clinker and cement
of these eight companies is 28.5 million tonnes (mt) and 33.1mt respectively. Yamama
Cement (YCC), with clinker and cement capacities of 6.0mt and 6.5mt respectively is the
biggest cement company at present.
Table 03 : Current Capacities, Production & Sale of Cement in Saudi Arabia

Figures in mt
Current Annual Production in Cement Sale in
Capacity 9M-07 9M-07
Companies Clinker Cement Clinker Cement Domestic Exports Total
Arabian Cement 2.6 3.0 1.9 2.2 2.2 - 2.2
Eastern Cement 3.2 3.4 2.5 2.6 1.8 0.8 2.6
Qassim Cement 3.0 4.0 2.0 2.5 2.2 0.3 2.5
Saudi Cement 4.5 6.0 3.6 4.0 3.1 0.9 4.0
Southern Cement 3.8 4.0 3.1 3.6 3.3 0.3 3.6
Tabuk Cement 1.2 1.4 1.0 1.1 1.1 - 1.1
Yamama Cement 6.0 6.5 3.3 3.6 3.4 0.2 3.6
Yanbu Cement 4.2 4.8 2.8 3.6 3.7 - 3.7
Total 28.5 33.1 20.2 23.2 20.8 2.5 23.3
Source: Company sources, yamamacement.com & Global Research
The total production of clinker and cement in the Kingdom in 2006 was 23.8mt and 27.0mt
respectively, 7.5 per cent and 3.7 per cent higher, respectively, over 2005. The production
of clinker and cement in the Kingdom grew at a CAGR of 2.4 per cent and 3.9 per cent,
respectively, during 2003-06. For the first nine months of 2007, the total production of
clinker and cement was 20.2mt and 23.2mt respectively.
Chart 09: Saudi Arabia - Shares in Clinker Production in 9M-2007

Arabian
Yanbu Cement
Cement 9.4%
13.9%
Eastern
Cement
Yamama
12.4%
Cement
16.3%
Qassim
Cement
Tabuk 9.9%
Cement
5.0%
Saudi
Southern Cement
Cement 17.8%
15.3%
Source: yamamacement.com & Global Research

Saudi Cement dominated the local cement industry, with clinker production of 3.6mt and
cement production of 4.0mt in 9M-2007. It was followed by Yamama Cement, Southern
Province Cement Company (SPCC) and Yanbu Cement. The top-4 companies – Saudi,
Yamama, SPCC and Yanbu – together had a share of about 63 per cent in clinker production
and 64 per cent in cement production in 9M-2007.
Chart 10: Saudi Arabia - Shares in Cement Production in 9M-2007

Arabian
Yanbu Cement
Cement 9.4%
15.6% Eastern
Cement
11.4%
Yamama Qassim
Cement Cement
15.6% 10.9%
Tabuk
Cement
4.6% Saudi
Southern Cement
Cement 17.1%
15.4%
The total sale of cement by the eight listed Saudi cement companies in 9M-2007 was 23.3mt,
up 10.7 per cent over the corresponding period of 2006. The cement sales in the Kingdom
grew at a CAGR of 3.8 per cent during 2003-’06. Around 20.8mt of cement was sold in the
domestic market and the remaining 2.5mt were exported in 9M-2007. Yanbu, with domestic
sales of 3.65mt was the leading cement seller in the domestic market, followed by Yamama
Cement, with domestic sales of 3.37mt during 9M-2007. Eastern Cement, with exports of
0.86mt, was the Kingdom’s leading cement exporter, followed by Saudi Cement, which sold
0.85mt in the export markets during 9M-2007.
Chart 11: Saudi Arabia - Shares in Cement Sales in 9M-2007

Arabian
Yanbu Cement
Cement 9.4%
15.7% Eastern
Cement
11.4%
Yamama
Cement Qassim
15.5% Cement
10.8%
Tabuk
Cement
4.6% Saudi
Southern Cement
Cement 17.2%
15.4%
10 Saudi Arabia Cement Sector November 2007

Thus, four companies – Saudi, SPCC, Yanbu and Yamama – have dominated the Saudi
cement industry, in terms of capacities, production as well as sales, in recent years.
Region-wise Market Shares
The Saudi Arabia cement market can broadly be divided in terms of the regions that constitute
the Kingdom, viz., Northern, Eastern, Southern, Western and Central regions. The five
regions have historically had different clinker/cement capacities and different shares in the
overall consumption pie with different growth rates. In a way, the differences also reflect the
disparities in the economic growth among the respective regions within the country. Three
regions – Eastern, Central and Western – dominate the total clinker and cement capacity in
the Kingdom. At present, the three regions together have over 80% share of the total clinker
capacity and the total cement capacity of the Kingdom. The pattern of consumption, though,
is slightly different.
Table 04: Region-wise Capacities (in ’000 tonnes)

Region Clinker Share Cement Share
Capacity Capacity
Central 9,000 31.6% 10,500 31.7%
Eastern 7,700 27.0% 9,400 28.4%
Northern 1,200 4.2% 1,400 4.2%
Southern 3,800 13.3% 4,000 12.1%
Western 6,800 23.9% 7,800 23.6%
Total 28,500 100.0% 33,100 100.0%
Source: Company sources, yamamacement.com & Global Research
Two regions – Central and Western – have dominated the cement consumption in the
Kingdom. While the shares of these two regions totaled 60% in 1995, it declined to 55% five
years later in 2000, declining subsequently to 50.7% in 2006. The decline is skewed towards
western region – Central region’s share in the overall consumption declining from 27% in
1995 to 24.3% in 2006, while the Western region has seen its share being trimmed from 33%
to 26.4% over the same time-period. The sole and significant gainer in the demand share over
this period has been the Eastern region, with its share in the overall pie going up from 15%
in 1995 to 25.5% in 2006. Besides, this region, with the largest reserves of oil in the world,
is the wealthiest among all the regions in the Kingdom. It also boasts of the highest CAGR in
cement consumption of about 9.8% among all the regions during 1995-2006. The Northern
region, on the contrary, has had a CAGR of 1.7% only and declining share in the overall
consumption pie (6.6% in 2006 as compared to 9.0% in 2000).
Table 05: Region-wise Growth of Cement Consumption (in ’000 tonnes)

Region 1995 2000 2006 CAGR CAGR
Amount Share Amount Share Amount Share 1995- 1995-
2000 2006
Western 4,969 33.0% 4,025 26.0% 6,520 26.4% -4.1% 2.5%
Central 4,066 27.0% 4,489 29.0% 6,000 24.3% 2.0% 3.6%
Eastern 2,259 15.0% 2,941 19.0% 6,310 25.5% 5.4% 9.8%
Southern 2,409 16.0% 2,631 17.0% 4,280 17.3% 1.8% 5.4%
Northern 1,355 9.0% 1,393 9.0% 1,630 6.6% 0.6% 1.7%
Total 15,058 100.0% 15,479 100.0% 24,740 100.0% 0.6% 4.6%
Source: Company sources, Global Research
November 2007 Saudi Arabia Cement Sector 11

Imports & Exports
Imports of clinker or cement into Saudi Arabia in 2006 were negligible. Arabian Cement
imported about 0.25mt of clinker in 2006. During 9M-2007, Yamama Cement and Saudi
Cement imported around 0.15mt and 0.06mt of clinker respectively.
Exports of cement from the country, mainly by Saudi Cement, EPCC and SPCC, have been
on an uptrend in recent years. The four companies (including Yamama, for the first time in
2006) together exported 2.26mt of cement in 2006. This was 35.3 per cent higher than in the
previous year. Exports grew at a CAGR of 6.3 per cent during 2003-’06. Saudi Cement and
EPCC were the major exporters in 2006, accounting for over 83 per cent of the total cement
exports. Exports have mostly been to Bahrain and Kuwait, the two neighboring markets to
Saudi Arabia. During 9M-2007, Saudi Cement and EPCC were also the major exporters,
accounting for around 70 per cent of the total cement exports.
Chart 12: Cement Exports from Saudi Arabia
2.5
2.26
Million Tonnes
2.0
1.88
1.67
1.52
1.5
2003 2004 2005 2006
Cement Realizations
On the back of healthy demand, average realizations for all the companies rose during 2006,
continuing the uptrend of the previous years. The weighted average realization for all the
eight companies combined was SR239.4/tonne, up 8.6 per cent over SR220.4/tonne in 2005,
gaining at a CAGR of 7.4 per cent over 2003-‘06. Average realizations, which are impacted
by local supply-demand dynamics, rose for all the companies in 2006, although by varying
degrees. Yanbu, Yamama and Tabuk were the top gainers in average realizations during the
year.

Chart 13: Average Cement Realizations in Saudi Arabia

240 239
230
220
220
SR/tonne
210
199
200
193
190
2003 2004 2005 2006
New Capacities
A healthy demand for cement, riding on the back of a healthy pipeline of civil, industrial
and infrastructure projects in Saudi Arabia, has spurred both clinker and cement capacity
expansions by all the existing companies.
Besides the above, many companies – both existing as well as new – have obtained licenses
for setting up greenfield clinker and cement projects in different regions of the Kingdom.
We estimate such licenses to be in the vicinity of 40mt of cement. But many new licenses
which were issued may not get converted into capacities as many of them do not have mining
licenses. Many of the companies seem to have obtained/renewed their licenses more with
the intention of creating entry barriers as a strategy to bar the entry of newcomers in their
territories.
Saudi Cement Sector Growth Drivers
• High growth curve of the Saudi economy over the last four years. The nominal GDP of
the Kingdom grew at a CAGR of 16.5 per cent over 2002-’06; in real terms, the CAGR
was 5.9 per cent.
• High liquidity in the system, resulting from sustained high budget surpluses flowing from
ruling high oil prices. The Kingdom’s budget surplus was SR223bn in 2005, increasing to
SR265bn in 2006. This has put a huge amount of funds at the disposal of the government,
a sizeable part of which is being invested by the latter in public infrastructure.
• High population growth-driven infrastructure spending. Saudi population grew at a

CAGR of 2.4% over the period 2001-06 which is one of the highest growth rates in the
world. The Kingdom’s population is projected to reach over 40mn by 2025 from 27.6mn
in mid 2007. The growing population puts enormous strain on the existing infrastructure,
necessitating increased investments in the sector.

• Favorable demographics, with about 60 per cent of the population in the age group of 15-
65 years in 2006. Population under 15 years of age, which is ready to join the work force
within the next decade, constituted about 38 per cent of the total population. A sizeable
young population is likely to translate into long-term demand for residential, hospitality,
leisure and commercial property. The strain on the Kingdom’s infrastructure could also
necessitate huge investments in this sector, which could, in turn, have a further multiplier
effect on the economy.
• Steadily improving per capita income of the country, which is estimated to have touched
US$14,454 in 2006. This translates into increasingly high disposable income in the hands
of the consumers.
• A rapid influx of big names in business, retail and hospitality sectors into the Kingdom in
recent years has ensured that demand for high-quality property is kept high.
• Landmark construction projects announced in the Kingdom in recent years, including the
setting-up of economic cities, which are expected to attract investments worth more than
SR300bn and create more than a million jobs within the next 10 to 20 years.
• Recent policy and reform measures announced in the Kingdom are quite investor-friendly.
Some of these include providing industries with investment benefits, setting up of world-
class infrastructure, and increasing the attractiveness of the industrial sector.
All of the above have had a favorable impact on the Kingdom’s cement market. The sustained
construction activity in civil, industrial and infrastructure projects is expected to support a
healthy cement demand in the Kingdom in the near-medium term
Financial Performance in 2006
The financial performance of all the listed cement companies in Saudi Arabia in 2005 and
2006 has been tabulated below.
Table 06: Financial Performance of the Listed Companies

(SRmn) 2005 2006
Y-o-Y % Change Y-o-Y % Change
Company Revenues Net Revenues Net Revenues Net Revenues Net

Profit Profit Profit Profit
Arabian Cement 687.2 330.9 18.7% 8.0% 747.8 333.6 8.8% 0.8%
Eastern Cement 551.8 298.8 12.6% 10.7% 772.6 445.5 40.0% 49.1%
Qassim Cement 493.7 281.5 22.2% 14.3% 543.1 315.6 10.0% 12.1%
Saudi Cement 1,116.3 484.3 18.7% 10.7% 1,200.2 637.8 7.5% 31.7%
Southern Cement 1,023.7 615.0 10.2% 12.7% 1,026.3 624.2 0.2% 1.5%
Tabuk Cement 304.0 154.8 7.0% 20.4% 380.1 217.5 25.0% 40.5%
Yamama Cement 791.1 500.9 21.5% -7.6% 950.1 601.2 20.1% 20.0%
Yanbu Cement 778.9 453.6 0.6% 6.1% 843.2 512.2 8.3% 12.9%
Total 5,746.8 3,119.8 13.7% 7.4% 6,463.5 3,687.6 12.5% 18.2%
Source: Company Financials; Global Research.

The combined revenues of all the eight listed companies were SR5.7bn in 2005, up 13.7
per cent over 2004, with net profits of SR3.1bn, up 7.4 per cent over 2004. The growth
momentum seems to have continued into 2006 as well, as evidenced by the results for the
year, with revenues increasing to SR6.5bn, up 12.5 per cent, and net profits increasing
to SR3.7bn, up 18.2 per cent, over the previous year. The revenues and net profits of the
eight companies grew at a CAGR of 11.5 per cent and 14.9 per cent, respectively, during
2003-’06.
Saudi Cement, SPCC and Yamama, the three leading cement sellers in terms of volumes,
were, naturally, also the leading companies in terms of value of sales in 2006. The three
companies together accounted for close to half of the total revenues and net profits of all
the eight listed companies that year. On the other hand, three companies – EPCC (revenues
up 40.0 per cent y-o-y, net profit up 49.1 per cent y-o-y), Tabuk (revenues up 25.0 per cent
y-o-y, net profit up 40.5 per cent y-o-y), and Yamama (revenues up 20.1 per cent y-o-y, net
profit up 20.0 per cent y-o-y) had above-average growth in both revenues and net profits
during the year.
Financial Performance in First Nine Months of 2007
The strong performance of the Saudi listed cement companies seems to be continuing into
2007 as well. Results for first nine months of 2007 for the companies suggest that the revenues
have grown by 17.8 per cent y-o-y, whereas the net profit has grown by 21.4 per cent y-o-y.
This could well be a pointer to another year of robust performance for these companies in
2007.
Table 07 : Financial Performance of Listed Cement Companies in Saudi Arabia

In SRmn. 9M- 2006 9M- 2007
Y-o-Y % Change
Revenues Net Revenues Net Revenues Net
Company Profit Profit Profit
Arabian Cement 564.8 274.4 557.7 306.1 -1.3% 11.6%
Eastern Cement 573.6 335.3 705.3 430.0 23.0% 28.2%
Qassim Cement 414.7 247.3 605.7 392.2 46.1% 58.5%
Saudi Cement 916.1 483.1 1,028.5 517.9 12.3% 7.2%
Southern Cement 787.9 488.1 886.6 549.0 12.5% 12.5%
Tabuk Cement 306.4 180.0 265.1 174.7 -13.5% -2.9%
Yamama Cement 756.9 489.4 920.7 604.4 21.6% 23.5%
Yanbu Cement 669.7 406.1 908.6 550.7 35.7% 35.6%
Total 4990.1 2903.7 5878.2 3525.0 17.8% 21.4%
Source: Company Financials; Global Research.
Stock Market Performance
The eight listed companies had a lackluster performance at the Saudi Stock Market (Tadawul)
during last 12 months, which was in line with the massive correction across the board in
Tadawul. All the eight stocks were down for most part of the last 12 months. However the
stocks have improved in recent months. Tadawul was the worst performing market among all
the stock markets in GCC in the last 12 months. Tadawul All Stock Index (TASI) has gained
only 2.3 per cent in last 12 months to November 6, 2007.

Table 08: Stock Market Performance

Company CMP (SR)* Variation in last 12
months (%)
Arabian Cement 93.0 7.8
Eastern Cement 80.5 11.4
Qassim Cement 145.0 0.2
Saudi Cement 100.3 4.7
Southern Cement 77.5 6.9
Tabuk Cement 33.3 -20.1
Yamama Cement 79.0 2.3
Yanbu Cement 82.0 10.8
*As on November 6, 2007
Source: Tadawul
Tabuk Cement was the worst impacted of the eight listed cement stocks on Tadawul, having
lost more than 20 per cent of its value in the past 12 months. Other stocks have recorded
positive performance mainly due to gains in recent months.

Peer Group Comparison

We have carried out the detailed analyses and equity valuation of six of the eight listed
cement companies in Saudi Arabia. These companies are Arabian Cement (ACC), Eastern
Province Cement (EPCC), Qassim Cement (QCC), Saudi Cement (SCC), Yamama Saudi
Cement (YSCC) and Yanbu Cement (YCC). We start off with a comparative analysis of
the financials of all the eight cement companies on broad parameters, such as profitability,
liquidity and valuation.
Profitability Analysis
We have analyzed profitability on the basis of operating profit margins, net profit margins,
operating expenses and return on average equities.
The operating profits as a proportion of the revenue (OPM) for the eight companies were in
the range of 43.3%-62.7%. At the upper end of the range were YSCC and YCC, with OPMs
of 62.7% and 60.1% respectively. OPMs of Saudi Cement and Tabuk Cement and Eastern
Cement saw much improvement in 2006 over the previous year.
Table 09: Operating Profit Margins (%)

Company 2004 2005 2006
Arabian Cement 38.5 45.6 43.3
Eastern Cement NA 51.6 56.5
Saudi Cement 43.6 42.2 51.1
Southern Cement 58.6 60.2 59.2
Tabuk Cement 44.7 51.3 56.1
Yamama Cement NA 63.4 62.7
Yanbu Cement 56.0 58.8 60.1
Qassim Cement NA 58.0 58.8
Source: Company Financials
The operating expenses of Yanbu and SPCC were the lowest among the industry in 2006.
Yanbu and SPCC’s general & administration expenses were the lowest in the industry at
0.3% of revenues, compared to 0.7% of Qassim. ACC and YSCC’s general expenses were
the highest at 1.4% of revenues in 2006. Similarly, staff expenses of Yanbu, at 1.5% of its
revenues, were the lowest among the industry, with ACC having the highest staff expenses
as a percentage of its revenues of 3.1%. As for the distribution expenses, Yamama and SPCC
were the lowest, with Saudi Cement being at the upper end with 1.2% because of its high
transportation and export expenses. The company is a leading exporter of cement from the
Kingdom.
Table 10: Operating Expenses as a percentage of Revenue (2006)

Expense Heads ACC EPCC SCC YSCC SPCC YCC QCC Tabuk
General & Administrative 1.4% 1.3% 0.7% 1.4% 0.3% 0.3% 0.7% 1.3%
Expenses
Staff Costs 3.1% 2.4% 2.6% 2.2% 1.7% 1.5% 2.0% 1.9%
Distribution Expenses 0.2% 0.6% 1.2% 0.1% 0.0% 0.3% 0.1% 0.0%

The net profits as a percentage of revenue too showed a wide range of 44.6%-63.3% in 2006.
At the lower end was ACC, with a NPM of 44.6%, while YSCC topped the list with net profit
at 63.3% of its revenue during the year.
Table 11: Net Profit Margins (%)

Company 2004 2005 2006
Eastern Cement NA 54.2 57.7
Yamama Cement NA 63.3 63.3
Qassim Cement NA 57.0 58.1
High net profits of the companies, in turn, led to high returns on average equity (RoAE) for
the companies. YSCC, once again, was at the top of the list with a RoAE of 34.2% in 2006.
SPCC followed with a RoAE of 33.0%. RoAEs of all other companies were in the range of
20.4%-29.0%.
Table 12: ROAEs (%)

Company 2004 2005 2006
Eastern Cement 19.6 18.9 25.3
Yamama Cement 44.7 34.3 34.2
Qassim Cement 22.8 24.5 25.4
Liquidity Analysis
The current ratios of the eight companies have been shown in Table 15. ACC had the highest
current ratio in the industry of 5.8x. EPCC had the next highest current ratio of 5.6x, rising
from 5.2x in the previous year. Tabuk and YSCC had lowest current ratios of 1.1x and 1.2x
respectively.
Table 13: Current Ratios (x)

Company 2004 2005 2006
Qassim Cement 7.4 1.7 1.5

Valuation Ratios
The EPS of Tabuk Cement and Arabian Cement saw a healthy increase over the period
of 2003-06. Despite the rise in their profits, stocks of all the companies had a lackluster
performance during past 12 months mainly due to correction in the Saudi market.
Table 14: Earnings (SR) & P/E

Company 2004 2005 2006
EPS P/E (x) EPS P/E (x) EPS P/E (x)
Arabian Cement 5.1 17.6 5.5 38.3 5.6 14.5
Eastern Cement 3.1 20.9 3.5 35.2 5.2 13.7
Saudi Cement 4.3 20.0 4.7 30.0 6.3 15.8
Southern Cement 3.9 20.5 4.4 26.7 4.5 16.4
Tabuk Cement 1.8 27.2 2.2 43.9 3.1 10.4
Yamama Cement 4.0 15.5 3.7 42.0 4.5 17.6
Yanbu Cement 4.1 23.3 4.3 33.7 4.9 14.7
Qassim Cement 5.5 19.5 6.3 37.8 7.0 22.1
Table 15: Book Value (SR) & P/BV

Company 2004 2005 2006
BVPS P/BV (x) BVPS P/BV (x) BVPS P/BV (x)
Arabian Cement 23.7 3.8 27.2 7.8 27.4 2.9
Eastern Cement 14.0 4.7 16.4 7.4 17.3 4.1
Saudi Cement 20.0 4.3 19.3 7.4 23.7 4.1
Southern Cement 11.5 7.0 13.3 8.8 13.7 5.3
Tabuk Cement 11.6 4.3 11.8 8.2 12.0 2.7
Yamama Cement 10.0 6.2 11.7 13.4 14.4 5.5
Yanbu Cement 19.2 4.9 18.5 7.9 19.9 3.6
Qassim Cement 24.6 4.3 26.4 9.0 28.8 5.4
Summary of Comparative Financial Performance
The eight companies compare differently on different parameters. While in terms of operating
profit as a percentage of revenue, YSCC and YCC score, in terms of RoAE, it is Southern and
Yamama. In terms of liquidity, Arabian and Eastern Cement had the highest current ratios
among the industry in 2006. Tabuk, Eastern and Saudi Cement were the biggest gainers in
terms of their EPS, while Qassim and Yamama had the highest P/E multiples among the
industry players during 2006. In terms of BVPS, Saudi and Yamama were the significant
gainer in 2006. Yamama and SPCC companies had the highest P/BV multiples during the
year.

Valuation and Recommendation

For arriving at the fair value of the companies under review, we have used two valuation
methods:
1. Discounted Cash Flow method
2. Relative Valuation method
Discounted Cash Flow (DCF) method

The DCF valuation used here is based on the free cash flow to firm (FCFF) defined as cash
flow left over after covering capital expenditure and working capital needs. The FCFF is
estimated for the period 2007 to 2010, which is the terminal year. In the terminal year, all
FCFF is capitalised. The FCFF and terminal value are then discounted back to present value
on the basis of the discounting factor, which is the cost of capital for the company. The
summation of all the present values of future cash flows and terminal value is the firm value
of the company. Value of debt is deducted to arrive at the equity value of the company.
The key assumptions made for the DCF method are given below.
1. Risk Free Rate (RFR) of 5.1% as per yield on the 10-year bond.
2. A market risk premium of 6.0% has been assumed.
3. The cost of equity was derived using the Capital Asset Pricing Model (CAPM)
4. Weighted Average Cost of Capital (WACC) for each company is calculated using the
target debt/equity ratio.
5. Terminal growth rate of 3.5% has been assumed, as it is expected to follow the long-
term GDP growth in the region.
Table 16: Value as per DCF method

Company Value (SR)
Arabian Cement 92.9
Eastern Cement 105.0
Qassim Cement 160.1
Saudi Cement 108.0
Yanbu Cement 97.4
Yamama Cement 87.2
Relative Valuation Method

The peer group valuation is performed to compare the intrinsic value of companies arrived
at using the DCF calculation. We have used the weighted average price-to-earnings (P/E)
multiple for the Saudi Cement industry. The price-earnings multiple of a stock is a reflection
of various factors, such as the expected profitability of the company, its growth potential
as perceived by the market, predictability and sustainability of its revenues, the quality of
its earnings and the quality of its management, among others. To arrive at the peer-set P/E
multiple, we have computed the average industry P/E of the cement companies in Saudi
Arabia, based on their current market prices and projected earnings for 2007 (for Southern
Province Cement and Tabuk Cement, we have taken annualized the earnings of first three
quarters). The weighted average P/E for the Saudi Cement industry, thus arrived at, is
13.6x.

Table 17: Average P/E ratios of the Saudi Cement Sector

Company 2007 NP - Proj. Market Cap* P/E
(SR mn) (SRmn)
Arabian Cement 368 5,580 15.2
Eastern Cement 577 6,923 12.0
Qassim Cement 493 6,525 13.2
Saudi Cement 680 10,226 15.0
Yanbu Cement 729 8,610 11.8
Yamama Cement 771 10,665 13.8
Tabuk Cement** 233 2,993 12.8
Southern Cement** 732 10,850 14.8
Total/ Average 4,583 62,371 13.6
*As on Nov 6th, 2007, ** Annualized earnings based on first three quarters of 2007
Source: Global Research, Tadawul
On the basis on industry average P/E of 13.6x, the value of the cement companies under
review is given in the table below.
Table 18: Value as per Relative Valuation method

Company Value (SR)
Arabian Cement 83.5
Eastern Cement 91.3
Qassim Cement 149.0
Saudi Cement 90.7
Yanbu Cement 94.5
Yamama Cement 77.7
To arrive at the final fair value, output of the DCF valuation is given a weightage of 80%
and relative valuation, 20%. We believe that DCF, which involves capitalisation of cash
flow projections, is a more accurate measure than the relative valuation method. However, to
capture the market moods and the level of valuations that the sector enjoys currently, we give
a minor weightage to the relative valuation method too.
Table 19: Weighted Average Value (SR)

Company DCF Value Relative Valuation Weighted Ave. Value
Qassim Cement 160.1 149.0 157.9
Saudi Cement 108.0 90.7 104.6
Table 20: “Global” Valuation Matrix

Name of the Current Target Reco. % upside BVPS EPS P/BV P/E
Company Price (SR) Price (SR) /downside (SR) (SR)
Arabian Cement 93.0 91.0 HOLD -2.2% 29.0 6.1 3.2 15.2
Eastern Cement 80.5 102.2 BUY 27.0% 17.9 6.7 4.5 12.0
Qassim Cement 145.0 157.9 HOLD 8.9% 33.2 10.9 4.4 13.2
Saudi Cement 100.3 104.6 HOLD 4.3% 24.4 6.7 4.1 15.0
Yanbu Cement 82.0 96.9 BUY 18.1% 21.6 6.9 3.8 11.8
Yamama Cement 79.0 85.3 HOLD 8.0% 16.9 5.7 4.7 13.8
Based on 2007 earnings and current market prices as on 6th Nov 2007

PLAYER PROFILES
ARABIAN CEMENT COMPANY
Reuters Code:
3010.SE
HOLD
Listing:
Saudi Stock Exchange
CMP:
SR93.00 (As on 6th Nov, 2007)
Key Data Company Background

EPS (SR)* 6.1
BVPS (SR)* 29.0 Arabian Cement Company (ACC) was the first
P/E (x)* 15.2 cement company to be established in Saudi Arabia
P/BV (x)* 3.2 back in 1956. The original plant, which was located
Avg. daily vol.(‘000) 280.2 North of Jeddah city, started production in 1959,
52 week Lo / Hi 68.75 / 93.00 with 300 tonnes per day (tpd) clinker and 100tpd
Market Cap (SR mn) 5,580.0 lime capacity. Due to the expansion of Jeddah city
Target Price (SR) 91.0 towards the North, the construction of King Abdul
* Projected (2007) Aziz international airport, and to maintain safe and
Source: Global Research healthy environment for Jeddah city and its people,
it was decided to construct a new plant far from Jeddah city. Rabigh area was the site of the
new plant due to certain locational advantages, like the availability of abundant limestone
deposits and proximity and easy accessibility to major markets, such as Jeddah, Makkah and
Madinah. The new plant had a capacity of 4,000tpd clinker, consisting of four long kilns, and
was inaugurated in 1984. The capacity was further increased to 4,400tpd.
Due to high demand growth, the company embarked on an expansion program in 1993. A
new 4,000tpd capacity short kiln was erected, along with vertical raw mill, pre-heater and
grinding mill, and was inaugurated in early 1997. In 2006, the annual clinker capacity stood
at 2.6mt, while the cement grinding capacity was 3.0mt. The company had 824 employees
at the end of 2006.
On June 28th 2007, the company signed a Memorandum of Understanding with Italcementi
of Italy to begin a feasibility study for a new cement plant near Jeddah. Once the feasibility
study is complete, details of the production capacity, construction timetable and size of
investment in the new plant will be revealed. The company also entered into a JV with
Italcementi for setting up a ready-mix unit in Jeddah. The company is also negotiating to
acquire existing ready-mix companies in Jeddah and also setting up a greenfield batch plant
in Rabigh, besides the one in Jeddah. On August 7th, 2007, the company signed a US$110mn
deal with Germany’s KHD Co. to supply equipment for its 5,000 tons per day cement plant in
Al Katrana district of the Karak Governorate in Jordan which is scheduled to be operational
in September 2009. ACC has 95% stake and the remaining 5% is owned by a Jordanian
investor. ACC plans to divest up to 30% of its stake in the plant.

Financial Performance
Revenue
The total revenue of the company was SR747.8mn for the year ended December 2006, an
increase of 8.8 per cent from SR687.2mn in the previous year. The higher revenue in 2006
was due to an increase in the average realization, despite a marginal decline in the volume
of cement sold during the year. The company sold 3.03mt of cement during 2006, 0.7 per
cent lower than 3.04mt that it had sold in the previous year. Simultaneously, the average
realizations firmed up to SR247.1/tonne, up 9.5 per cent from the previous year. The company
sells all its cement in the domestic market.
Chart 1: Operational Measures

1,000
800
600
400
200
SR mn
-
Sales Revenue Cost of Production Gross Profit Net Profit
(200)
(400)
(600)
2005 2006
Expenditure
The total cost of production of the company was SR375.2mn during 2006, 10.8 per cent
higher than in the previous year. The salaries and employees’ benefits decreased by 5.6 per
cent during the year. As a percentage of revenue, the staff expenses declined to 3.1 per cent
in 2006 from 3.6 per cent in 2005. The number of employees rose to about 824 at the end of
2006 from 814 a year earlier. General & administrative expenses increased by 67.3 per cent
during the year. As a percentage of revenue too, these expenses increased to 1.4 per cent in
2006, from 0.9 per cent in 2005.
Profitability
The gross profit grew by 6.9 per cent to SR372.6mn in 2006. As a result of a steeper increase
in the cost of production as compared to that in the sales revenue, the gross profit margin
decreased to 49.8 per cent in 2006, from 50.7 per cent in 2005. The operating profit of
the company increased by 3.4 per cent to SR324.0mn in 2006. The operating profit margin
decreased to 43.3 per cent in 2006 from 45.6 per cent in 2005.
Non-Operational Income & Expenses

Gains from short-term investments amounted to SR16.9mn during the year, up 14.8 per cent
over 2005. The average yield of 3.6 per cent was steady at the level of 2005. Income from

available-for-sale investments, on the other hand, declined by 36.1 per cent y-o-y to SR6.1mn
in 2006, with the average yield declining to 2.7 per cent during the year from 4.1 per cent in
the previous year.
Net Profit
The net profit of the company inched up by 0.8 per cent to SR333.6mn in 2006, from
SR330.9mn in 2005. The net profit margin simultaneously decreased from 48.1 per cent in
2005 to 44.6 per cent in 2006.
Chart 2: Profitability Ratios
60
50
40
%
30
20
10
-
2003 2004 2005 2006
Return on Average Assets (%) Return on Average Equity (%)
Return on Common Capital (%)
Profitability Ratios
The return on average assets decreased from 19.9% in 2005 to 18.7% in 2006, following the
rise in the asset size during the year. Simultaneously, the return on average equity saw a fall
from 21.7% in 2005 to 20.4% in 2006.
Dividends
The company distributed a cash dividend of 40 per cent for 2006. In 2005 too, the company
had distributed a 40 per cent cash dividend.
Assets and Liabilities

The total assets of the company rose by 3.3 per cent to SR1.8bn at the end of 2006. While the
current assets increased by 8.0 per cent at the end of the year, accounts receivable witnessed
a rise of 18.1 per cent to SR133.1mn at the end of the year (60 receivable-days in 2006,
marginally up from 59 in 2005). Simultaneously, inventories inched up by 0.5 per cent to
SR134.9mn at the end of the year (131 inventory-days in 2006, down from 159 in 2005).
Short-term investments amounted to SR509.1mn, 22.1 per cent higher than at the end of
the previous year. Long-term investments, on the other hand, declined by more than a third
to SR178.5mn at the end of the year. The net fixed assets increased by 13.1 per cent to
SR853.0mn in 2006.

On the liabilities side, the accounts payable increased by 36.1 per cent to SR67.9mn at the end
of 2006 (57 payable-days in 2006, up from 51 in 2005). The company did not have any debt
outstanding on its books at the end of 2006. The total equity of the company rose marginally
to SR1.65bn at the end of the year from SR1.63bn at the end of the previous year.
Financial Performance in the First Nine Months of 2007
The company had operational revenues of SR557.7mn in the first nine months of 2007,
down 1.3 per cent y-o-y. The operating profit, which was SR292.2mn, was up 9.9 per cent
y-o-y, for an operating profit margin of 52.3 per cent, against 47.1 per cent a year ago. Net
other income was up by 17.3 per cent to SR24.3mn on gains on the company’s investment
portfolio. The company’s net profit during the period of SR306.1mn was 11.6 per cent higher
than SR274.4mn in the corresponding nine months of 2006, for a net profit margin of 54.9
per cent, as against 48.6 per cent in the nine months of 2006.
Table 1: First Nine Months of 2007

(SR ‘000) 9M 2007 9M 2006 % Change
Sales 557,683 564,767 -1.3%
Operating Profit 292,177 265,753 9.9%
Net Other Income 24,268 20,682 17.3%
Profit Before Zakat 316,445 286,435 10.5%
Zakat (10,300) (12,000) -14.2%
Net Profit 306,144 274,435 11.6%
Outlook and Valuation:
The company is expanding its capacity, which will rise to 4.5mt of clinker and 5.1mt of
cement capacity after the completion of expansion in 2008. The company is likely to fully
reap the benefits of the expanded capacity from 2008. Lower cement prices projected from
2008 could, however, slow its revenue growth thereafter, which could get partly offset by the
scaling up of its capacities.
Based on the current market price of SR93.0, the stock is trading at 15.2x 2007E earnings and
3.2x 2007E book value. The stock is trading at 14.4x 2008E earnings and 3.1x 2008E book
value. Based on our expectations about the future potential of ACC, we have valued ACC’s
share price at SR91.00. The stock currently trades at SR93.0, which implies that the value
arrived at using the weighted average method is around 2.2% lower than the current market
price. Hence we recommend “HOLD” on ACC’s stock.

BALANCE SHEET
Amounts in SR ‘000 2004 2005 2006 2007 (F) 2008 (F) 2009 (F) 2010 (F)
Assets
Bank & cash equivalents 57,885 56,633 969 94,296 124,258 128,621 165,911
Trade receivables 108,911 112,710 133,103 134,670 138,868 156,149 159,573
Inventories 160,279 134,216 134,922 129,107 133,410 143,211 148,750
November 2007
Investment Portfolios 394,066 416,966 509,134 25,457 50,457 75,000 175,000
Total Current Assets 721,141 720,527 778,128 383,530 446,993 502,981 649,235
Long-term investments 191,579 276,537 178,456 207,394 229,225 253,354 280,023
Gross fixed assets 2,189,184 2,356,473 2,534,122 3,184,122 3,259,122 3,334,122 3,409,122
Less: Accumulated depreciation 1,533,634 1,602,466 1,681,111 1,771,664 1,867,254 1,965,069 2,065,110
Global Research - Saudi Arabia
Net fixed assets 655,551 754,007 853,011 1,412,458 1,391,868 1,369,053 1,344,012
Total Assets 1,568,271 1,751,070 1,809,594 2,003,382 2,068,087 2,125,388 2,273,270
Liabilities
Accounts payable 45,426 49,844 67,852 64,553 68,857 71,605 71,810

Current portion of medium term loan - - - 45,000 54,000 59,400 104,742
Accrued Zakat 14,745 13,024 16,164 17,347 18,283 19,832 21,324
Dividends payable 63,535 33,160 51,146 40,203 29,260 - -

Total Current Liabilities 123,706 96,028 135,162 167,103 170,400 150,837 197,876
Medium-term loan - - - 60,000 72,000 79,200 91,080

Employee Indemnity Provision 23,268 24,979 27,653 34,566 36,294 38,109 40,014
Owner’s Equity:
Paid-up equity capital 600,000 600,000 600,000 600,000 600,000 600,000 600,000
Statutory reserve 300,000 300,000 300,000 300,000 300,000 300,000 300,000
General reserve 95,000 95,000 95,000 95,000 95,000 95,000 95,000
Retained earnings 308,878 433,328 548,759 614,754 640,602 684,323 744,711
Unrealized gain on investment 117,419 201,734 103,021 131,959 153,790 177,919 204,588
Global Investment House
27
Total Shareholder’s Equity 1,421,297 1,630,063 1,646,779 1,741,713 1,789,393 1,857,242 1,944,299
Total Liabilities & Owner’s Equity 1,568,271 1,751,070 1,809,594 2,003,382 2,068,087 2,125,388 2,273,270
OPERATING STATEMENT
28
Sales Revenue 578,799 687,227 747,848 762,743 839,452 911,357 970,739
Cost of Production (315,060) (338,677) (375,203) (363,452) (404,905) (441,337) (469,410)
Gross Profit 263,739 348,550 372,645 399,291 434,547 470,020 501,329
General & Administrative Expenses (5,172) (6,352) (10,625) (10,678) (11,752) (12,759) (13,590)
Staff Costs (21,582) (24,527) (23,159) (22,882) (25,184) (27,341) (29,122)
Distribution Expenses (1,056) (826) (1,395) (1,525) (1,679) (1,823) (1,941)
Provisions (11,027) (1,353) (9,786) (6,734) (6,943) (7,807) (7,979)
Depreciation (2,038) (2,160) (3,678) (4,300) (4,845) (4,958) (5,071)
Operating Profit 222,865 313,332 324,002 353,171 384,144 415,332 443,625

Other Income 3,610 4,874 2,944 9,533 10,580 11,642 12,653
Income from Available-for-Sale investments 14,893 9,618 6,142 9,646 10,915 12,064 13,334
Gains from short-term investments 7,583 14,720 16,900 13,365 1,898 3,136 6,250
Interest expenses - - - (919) (2,021) (2,315) (2,926)
Profit on disposal of investments 72,124 - - - - - -
Company’s shares in income of associates 392 893 633 696 765 842 926
Foreign currency exchange loss (495) (169) 466 - - - -
Profit Before Tax 320,971 343,267 351,087 385,492 406,282 440,702 473,862

Zakat (14,595) (12,417) (17,507) (17,347) (18,283) (19,832) (21,324)
Net Profit 306,376 330,851 333,580 368,145 387,999 420,870 452,538
P&L Appropriation Account:

Opening Balance of Retained Earnings 250,902 308,878 433,328 548,759 614,753 640,602 684,322
Net Profit for the year 306,376 330,851 333,580 368,145 387,999 420,870 452,538
Directors fees (2,400) (2,400) (2,150) (2,150) (2,150) (2,150) (2,150)
Proposed Cash Dividend (246,000) (204,000) (216,000) (300,000) (360,000) (375,000) (390,000)
Closing Balance of Retained Earnings 308,878 433,328 548,759 614,753 640,602 684,322 744,711
November 2007
CASH FLOW STATEMENT
Operating
Operating Activities 302,777 385,563 393,354 433,290 463,180 495,130 524,248
Net Profit 306,376 330,851 333,580 368,145 387,999 420,870 452,538
Depreciation 77,733 78,101 80,986 90,552 95,590 97,815 100,041
Other Income - - - (9,533) (10,580) (11,642) (12,653)
Income from associates (392) (893) (633) (696) (765) (842) (926)
November 2007
Income from short-term investments (7,583) (14,720) (16,900) (13,365) (1,898) (3,136) (6,250)
Gain on sale of property, plant and eqpt (176) (762) (211) - - - -
Amortization of deferred charges 10,971 - - - - - -
Income from Sale of Investments (87,016) (8,725) (6,142) - - - -
Income from Available-for-Sale investments - - - (9,646) (10,915) (12,064) (13,334)
Increase in indemnity provisions 2,865 1,711 2,673 6,913 1,728 1,815 1,905
Interest expenses - - - 919 2,021 2,315 2,926

Working Capital 26,336 24,960 50 2,133 (3,263) (22,784) (7,267)
Dec/(inc.) in receivables (9,626) (3,799) (20,392) (1,567) (4,198) (17,281) (3,425)
Dec / (inc) in Inventories 31,521 26,063 (706) 5,815 (4,304) (9,801) (5,539)
Dec/ (inc) in accrued Zakat - - 3,140 1,183 936 1,549 1,492
Inc/(dec) in accounts payable (776) 4,418 18,008 (3,299) 4,304 2,748 205
Inc/(dec) in other liabilities 5,217 (1,721) - - - - -
Total Operating 329,113 410,524 393,404 435,422 459,917 472,347 516,981
Investing
Capex (35,722) (176,752) (180,127) (650,000) (75,000) (75,000) (75,000)
Income from short-term investments 14,893 8,725 23,674 13,365 1,898 3,136 6,250

Proceeds from disposal of property 188 957 348 - - - -
Other Income - - - 9,533 10,580 11,642 12,653
Income from Available-for-Sale investments - - - 9,646 10,915 12,064 13,334
Income from associates - - - 696 765 842 926
Sale / (Purchase) of investments available for sale 87,824 250 (633) - - - 0
Change in short-term investments (159,029) (8,180) (92,168) 483,677 (25,000) (24,543) (100,000)
Total Investing (91,846) (175,000) (248,905) (133,083) (75,841) (71,858) (141,837)
Financing
Loan - - - 105,000 21,000 12,600 57,222
Dividend (193,080) (234,375) (198,014) (310,943) (370,943) (404,260) (390,000)
Directors fees (2,400) (2,400) (2,150) (2,150) (2,150) (2,150) (2,150)
29
Interest expenses - - - (919) (2,021) (2,315) (2,926)
Total Financing (195,480) (236,775) (200,164) (209,012) (354,114) (396,125) (337,854)
Net Change in Cash 41,787 (1,252) (55,665) 93,327 29,962 4,363 37,290
Net Cash at beginning 16,098 57,885 56,634 969 94,296 124,258 128,621
Net Cash at end 57,885 56,634 969 94,296 124,258 128,621 165,911
FACT SHEET
2004 2005 2006 2007 (F) 2008 (F) 2009 (F) 2010 (F)
Liquidity Ratios
- Current Ratio (x) 5.8 7.5 5.8 2.3 2.6 3.3 3.3
- Quick Ratio (x) 4.5 6.1 4.8 1.5 1.8 2.4 2.5
- Inventory stock (days) 204 159 131 133 118 114 114
- Receivables outstanding (days) 66 59 60 64 59 59 59
- Length of operating cycle (days) 270 218 191 197 178 173 173
- Payables outstanding (days) 53 51 57 66 60 58 56
- Length of cash cycle (days) 217 166 134 130 118 115 117
- Total Assets Turnover (x) 0.4 0.4 0.4 0.4 0.4 0.4 0.4
- Total Net Fixed Assets Turnover (x) 0.9 1.0 0.9 0.7 0.6 0.7 0.7
- Equity Turnover (x) 0.4 0.5 0.5 0.5 0.5 0.5 0.5
- Gross Profit Margin (%) 45.6 50.7 49.8 52.3 51.8 51.6 51.6
- Operating Margin (%) 38.5 45.6 43.3 46.3 45.8 45.6 45.7
- Net Profit Margin (%) 52.9 48.1 44.6 48.3 46.2 46.2 46.6
- Return on Average Assets (%) 20.1 19.9 18.7 19.3 19.1 20.1 20.6
- Return on Average Equity (%) 21.8 21.7 20.4 21.7 22.0 23.1 23.8
- Return on Common Capital (%) 51.1 55.1 55.6 61.4 64.7 70.1 75.4
Activity Ratios
- Inventory Turnover Ratio (x) 1.8 2.3 2.8 2.8 3.1 3.2 3.2
- Debtor turnover Ratio (x) 5.6 6.2 6.1 5.7 6.1 6.2 6.1
- Creditors Turnover Ratio (x) 6.9 7.1 6.4 5.5 6.1 6.3 6.5
Leverage Ratios
- Current Liability / Equity (x) 0.1 0.1 0.1 0.1 0.1 0.1 0.1
- Debt / Equity (x) 0.0 0.0 0.0 0.1 0.1 0.1 0.1
Ratios Used for Valuation

- EPS (SR) 5.1 5.5 5.6 6.1 6.5 7.0 7.5
- Book Value Per Share (SR) 23.7 27.2 27.4 29.0 29.8 31.0 32.4
- Dividend Payout (%) 80.3 61.7 64.8 81.5 92.8 89.1 86.2
- Market Price (SR) * 90.0 211.4 80.5 93.0 93.0 93.0 93.0
- P/E 17.6 38.3 14.5 15.2 14.4 13.3 12.3
- P/BV 3.8 7.8 2.9 3.2 3.1 3.0 2.9
- Dividend Yield (%) 4.6 1.7 4.5 5.4 6.5 6.7 7.0
* Market price for 2007 and subsequent years as on Nov 6, 2007.

EASTERN PROVINCE CEMENT COMPANY
Reuters Code:
3080.SE BUY
Listing:
CMP:
SR80.50 (As on 6th Nov, 2007)

EPS (SR)* 6.7
BVPS (SR)* 17.9 Eastern Province Cement Company (EPCC) was
P / E (x)* 12.0 established in 1983 as Saudi Kuwaiti Cement
P / BV (x)* 4.5 Company. The first commercial clinker production
Avg. daily vol.(‘000) 178.9 was started on 6th October 1984. The 2 x 3500 MT/
52 week Lo / Hi 64.25 / 87.75 day clinker production capacity plant is located at
Market Cap (SR mn) 6,923.0 Al Khursaniyah, close to the Dammam-Kuwait and
Target Price (SR) 102.2 Jubail-Abu Hadriah Highway. It is located just over
* Projected (2007) 60 kms away from the biggest commercial port of
Source: Global Research Jubail making easier cost effective export facilities
to any part of the globe.
The technical concept for the plant was formulated by EPCC management assisted by
prospective Engineering Gestion (PEG) of Geneva, Switzerland. All the plant machineries
were from the leaders of cement machinery manufacturing namely Krupp Polysis Germany,
supported by another Global Leader ABB, Switzerland the Electrical and control system.
After the completion of the most recent expansion in 2006, the current annual cement grinding
capacity stands at 3.4mt. EPCC is an ISO 9002 certified company as well the products are
certified by SASO (Saudi Arabian Standard Organization.)
Revenue
The sales revenue increased by 40.0% on Y-o-Y basis to reach SR772.6mn in 2006. The higher
revenue in 2006 was due to both an increase in cement sold (up by 28.8% on y-o-y basis) and
an increase in the average realization (up by 8.7% on y-o-y basis). The company sold 3.2mt
of cement during 2006, as compared to 2.5 mt sold in the previous year. Simultaneously,
the average realizations firmed up to SR240.0/tonne, as compared to SR220.8/tonne in the
previous year.
Cost of Production
The total cost of production of the company was SR300.1mn during 2006, 26.9 per cent
higher than in the previous year. However, cost of production per ton fell from SR94.6 in
2005 to SR93.2 in 2006, which helped to contain cost of production to 38.8% of revenue in
2006 as compared to 42.8% in 2005.

Gross Profit
The gross profit grew by 49.8 per cent to SR472.5mn in 2006. As a result of a steeper
increase in the sales revenue (up by 40.0%) as compared to that in the cost of production (up
by 26.9%), the gross profit margin increased to 61.2 per cent in 2006 from 57.2 per cent in
2005.

1,000
800
600
400
SRmn
200
-
Sales Revenue Cost of Gross Profit Net Profit
(200) Production
(400)
2005 2006
Other Operational Expenses

The salaries and employees’ benefits decreased by 0.1 per cent during the year. As a
percentage of revenue too, the staff expenses declined to 2.4 per cent in 2006 from 3.4 per
cent in 2005. The number of employees stood at 700 at the end of 2006.
General & administrative expenses increased by 7.4 per cent during the year. However, as
a percentage of revenue, these expenses decreased to 1.3 per cent in 2006 from 1.7 per cent
in 2005.
Operating Profit
The operating profit of the company increased by 53.3 per cent to SR436.8mn in 2006. The
operating profit margin increased to 56.5 per cent in 2006 from 51.6 per cent in 2005, as a
result of a lower increase in the total operating costs (17.1% on y-o-y basis) as compared to
that in the sales revenue (40.0% on y-o-y basis).
Non-Operational Income
There were no gains from investments during the year, as compared to SR10.7mn in 2005.
Other income was up by 85.2% to reach SR28.2mn during 2006.
Net Profit
The net profit of the company jumped up by 49.1 per cent to SR445.5mn in 2006, from
SR298.8mn in 2005. The net profit margin simultaneously increased to 57.7 per cent in 2006
as compared to 54.2 per cent in 2005, owing to lower growth in operational expenses and cost
of production during the year.

The return on average assets increased to 21.1% in 2006 from 16.7% in 2005, following the
increase in net profit during the year. Simultaneously, the return on average equity saw a rise
from 18.9% in 2005 to 25.3% in 2006.

70
60
50
40
%
30
20
10
0
2003 2004 2005 2006
Dividends
The company distributed a cash dividend of 40 per cent in 2006. The payout ratio fell to
77.6% in 2006 from 94.1% in 2005.
Assets and Liabilities

The total assets of the company rose by 10.7 per cent to SR2.2bn at the end of 2006. While the
current assets increased by 53.0 per cent at the end of the year, accounts receivable witnessed
a rise of 26.8 per cent to SR112.2mn. Simultaneously, inventories inched up by 9.8 per cent
to SR191.6mn at the end of 2006. Investments amounted to SR366.8mn, 27.9 per cent lower
than at the end of the previous year. Net fixed assets increased by 1.6 per cent to SR879.7mn
in 2006. On the liabilities side, the accounts payable increased by 75.0 per cent to SR71.7mn
at the end of 2006. Total liabilities increased by 25.2% to reach SR382.0mn in 2006.
Financial Performance in the First Nine Months of 2007
The company had operational revenues of SR705.3mn in the first nine months of 2007.
The operating profit, which was SR411.8mn, was up by 25.1 per cent on y-o-y basis. Other
income was up by 45.0 per cent to SR34.2mn. The company’s net profit during the nine
months of ’07 at SR429.9mn was 28.2 per cent higher than SR335.3mn in the corresponding
period of 2006, for a net profit margin of 60.9 per cent.

Table 1: First Nine Months of 2007

(SR ’000) 9M 2007 9M 2006 % Change
Sales 705,305 573,578 23.0%
Other Income 34,220 23,608 45.0%
Zakat (16,101) (16,147) -0.3%
Net Profit 429,970 335,326 28.2%

The current annual cement grinding capacity is 3.4mt. The company is also expanding
regionally as it took a 30% stake in the Arabian Yemeni Cement Company in Yemen. The
expanded clinker capacity should give it greater economies of scale, thereby, boosting its
margins going forward. EPCC’s strategy seems to be to garner the maximum leverage from
the booming real estate sector.
Based on the current market price of SR80.50, the stock is trading at 12.0x 2007E earnings
and 4.5x 2007E book value. The stock is trading at 11.2x 2008E earnings and 4.3x 2008E
book value. Based on our expectations about the future potential of EPCC, we have valued
EPCC’s share price at SR102.2. The stock currently trades at SR80.50, which implies that the
value arrived at using the weighted average method is around 27.0% higher than the current
market price. Hence we recommend “BUY” on EPCC’s stock.

BALANCE SHEET
Assets:
Cash and cash equivalents 127,344 311,770 601,677 604,582 568,655 520,837 465,942
Account receivable - trade 104,705 88,535 112,233 122,379 127,760 129,779 132,750
November 2007
Inventories 150,710 174,511 191,581 224,598 228,775 234,066 243,509
Prepaid expenses and other debit balances 29,147 44,650 42,033 44,135 46,341 48,658 51,091
Non-current assets:
Investments 580,331 508,784 366,797 470,856 575,117 679,591 784,289
Property and equipment 583,973 865,836 879,668 903,885 908,784 911,434 940,933
Deferred charges 6,616 5,695 20,614 21,027 21,447 21,876 22,314
Total non-current 1,170,920 1,380,314 1,267,079 1,395,767 1,505,348 1,612,901 1,747,536
Total Assets 1,582,827 1,999,781 2,214,604 2,391,461 2,476,880 2,546,242 2,640,828
Liabilities:
Accrued expenses and other liabilities 54,013 63,027 65,536 45,536 45,536 45,536 45,536
Zakat provision 7,067 10,505 15,734 16,521 17,347 18,214 19,125

Current portion of long-term loan - 4,000 17,000 4,068 15,000 15,000 15,000
Long-term loan - 162,400 185,400 150,400 120,400 90,400 60,400
End-of service Indemnity 24,520 24,282 26,585 29,243 30,706 32,241 33,853
Total Liabilities 116,583 305,198 381,955 323,513 310,694 286,334 260,320
Owner’s Equity:
Share capital 645,000 645,000 860,000 860,000 860,000 860,000 860,000
Capital expansion reserve 120,000 120,000 120,000 120,000 120,000 120,000 120,000
Non-realized profit from investment 132,998 322,301 81,167 85,226 89,487 93,961 98,659
35
Proposed dividends 259,800 281,300 345,800 525,108 550,985 557,002 571,969
Total Owner’s Equity 1,466,244 1,694,583 1,832,648 2,067,948 2,166,186 2,259,908 2,380,508
Total Liabilities and Owner’s equity 1,582,827 1,999,781 2,214,604 2,391,461 2,476,880 2,546,242 2,640,828
36
OPERATING STATEMENT
Sales Revenue NA 551,799 772,593 941,380 994,240 1,021,880 1,062,000
Cost of Production NA (236,409) (300,108) (345,535) (363,135) (377,527) (392,756)
Gross Profit 274,535 315,390 472,485 595,845 631,105 644,353 669,244
Staff Cost (17,582) (18,801) (18,787) (21,009) (21,194) (21,783) (22,639)
Selling and distribution expenses (695) (606) (4,852) (5,648) (5,965) (6,131) (6,372)
Depreciation (1,253) (1,757) (2,042) (4,459) (4,532) (4,551) (4,631)

General and administrative expenses (9,776) (9,303) (9,988) (11,297) (11,434) (11,752) (12,213)
Operating profit 245,230 284,923 436,816 553,433 587,980 600,137 623,389
Finance Cost - (1,544) (3,787) (2,557) (2,047) (1,537) (1,027)
Income from investments 18,117 10,736 - 14,659 18,305 21,957 25,618
Other income 13,634 15,225 28,205 32,436 37,301 42,896 49,331
Net profit before Zakat 276,981 309,341 461,233 597,971 641,538 663,453 697,311
Zakat (7,067) (10,505) (15,734) (20,929) (22,454) (23,221) (24,406)
Net Profit 269,913 298,836 445,499 577,042 619,085 640,233 672,905

P&L Appropriation
Opening Balance of Retained Earnings - 2,876 3,482 58,631 52,861 59,052 78,258
Net (income) for the year 269,912 298,836 445,499 577,042 619,085 640,233 672,905
Transfer to statutory reserves (26,991) (16,929) (44,550) (57,704) (61,908) (64,023) (67,290)
Other transfers 19,755 - - - - - -
Proposed dividend (259,800) (281,300) (345,800) (525,108) (550,985) (557,002) (571,969)
November 2007
CASH FLOW STATEMENT
Operating activities
Net income before Zakat 276,979 309,341 461,233 597,971 641,538 663,453 697,311
Adjustment:
Depreciation and amortization 42,566 53,540 65, 67,851 70,101 72,351 75,501
November 2007
End-of-service 4,555 4,102 3,801 2,658 1,462 1,535 1,612
Loss on disposal of property and equipment 93 (1,321) 1,094 - - - -
Income from investment - (10,736) 1,248 (14,659) (18,305) (21,957) (25,618)
Total 324,192 354,926 532,831 653,821 694,797 715,382 748,806
Changes in current assets and liabilities
Account receivables (4,114) 16,170 (23,698) (10,147) (5,380) (2,019) (2,971)
Inventories (22,232) (23,801) (17,070) (33,016) (4,178) (5,291) (9,442)

Prepaid expenses and other debit balances (27) (3,864) 6,562 (2,102) (2,207) (2,317) (2,433)
Accounts payable and accrued expenses and other liabilities (4,785) 10,000 30,717 6,045 3,960 3,238 1,463
Cash from operations 293,034 353,431 529,343 614,601 686,992 708,993 735,422
Zakat paid (7,769) (7,067) (10,505) (20,142) (21,628) (22,354) (23,495)
End-of-service indemnities paid (1,777) (4,340) (1,498) - - - -
Net Cash from Operating activities 283,488 342,024 517,340 594,458 665,364 686,639 711,927
Investing activities
Net Proceeds from disposal/purchase of investments 47,868 271,586 (100,395) (100,000) (100,000) (100,000) (100,000)
Proceeds from disposal of property and equipment 546 1,400 - - - - -

Additions of property and equipment (153,588) (321,662) (71,127) (125,000) (75,000) (75,000) (105,000)
Addition to deferred charges (6,169) (12,898) (24,174) (412) (421) (429) (438)
Income received from investments - - - 14,659 18,305 21,957 25,618
Net cash flow from Investing activities (111,343) (61,574) (195,696) (210,753) (157,116) (153,472) (179,820)
Financing Activities
Medium Term Loan - 166,400 36,000 (35,000) (19,068) (30,000) (30,000)
Prepaid Financing Interest - (11,602) - - - - -
Dividends paid (220,663) (250,822) (67,737) (345,800) (525,108) (550,985) (557,002)
Net cash flow from Financing activities (220,663) (96,025) (31,737) (380,800) (544,175) (580,985) (587,002)
Net Change in Cash and cash equivalents (48,518) 184,426 289,908 2,905 (35,927) (47,818) (54,895)
37
Cash and cash equivalents, January 1 175,863 127,344 311,770 601,677 604,582 568,655 520,837
Cash and cash equivalents, December 31 127,344 311,770 601,677 604,582 568,655 520,837 465,942
FACT SHEET
2004 2005 2006 2007 (F) 2008 (F) 2009 (F) 2010 (F)
Liquidity Ratios
- Current Ratio (x) 4.5 5.2 5.6 6.9 6.1 5.7 5.4
- Quick Ratio (x) 2.8 3.8 4.4 5.4 4.7 4.3 3.9
- Total Assets Turnover (x) NA 0.3 0.4 0.4 0.4 0.4 0.4
- Total Net Fixed Assets Turnover (x) NA 0.8 0.9 1.1 1.1 1.1 1.1
- Equity Turnover (x) NA 0.3 0.4 0.5 0.5 0.5 0.5
- Gross Profit Margin (%) NA 57.2 61.2 63.3 63.5 63.1 63.0
- Operating Margin (%) NA 51.6 56.5 58.8 59.1 58.7 58.7
- Net Profit Margin (%) NA 54.2 57.7 61.3 62.3 62.7 63.4
Activity Ratios
- Inventory Turnover Ratio (x) NA 1.5 1.6 1.7 1.6 1.6 1.6
- Debtor turnover Ratio (x) NA 5.7 7.7 8.0 7.9 7.9 8.1
- Creditors Turnover Ratio (x) NA 4.0 4.7 6.2 8.0 8.3 8.6
Leverage Ratios
- Debt / Equity (x) 0.00 0.10 0.11 0.07 0.06 0.05 0.03

- EPS (SR) 3.1 3.5 5.2 6.7 7.2 7.4 7.8
- Dividend Payout Ratio (%) 96.3% 94.1% 77.6% 91.0% 89.0% 87.0% 85.0%
- Market Price (SR) * 65.6 122.3 71.0 80.5 80.5 80.5 80.5
- P/E Ratio (x) 20.9 35.2 13.7 12.0 11.2 10.8 10.3
- P/BV (x) 4.7 7.4 4.1 4.5 4.3 4.1 3.8

QASSIM CEMENT
Reuters Code:
3040.SE HOLD
Listing:
CMP:
SR145.00 (As on 6th Nov, 2007)

EPS (SR)* 10.9
BVPS (SR)* 33.2 Qassim Cement Company (QCC) was founded in
P / E (x)* 13.2 1976 at Buraydah in Al Qassim region in the heart
P / BV (x)* 4.4 of the Kingdom of Saudi Arabia, 330 Km North-
Avg. daily vol.(‘000) 201.1 West of Riyadh. The company targets the Northwest
52 week Lo / Hi 114.25 / 182.50 and Central Saudi region for selling its products.
Market Cap (SR mn) 6,525.0 Yamama Cement is its competitor in this market.
Target Price (SR) 157.9
* Projected (2007) The production capacity of the company was raised
Source: Global Research from 2,000tpd to 4,200tpd of clinker in 1986. In
1996, the company raised its total production capacity to 4,700tpd, raising it further in 2003
to 5,000tpd. The improvements to the first line, originally installed with KHD (Germany)
technology, were carried out by France’s FCB, with an aim to reduce the dust emissions and
improve the energy-efficiency of the plant. The second line of the plant has technology from
Ishikawajima-Harima Heavy Industries Co. Ltd. (IHI) of Japan. Recent capacity addition
in 2007 almost doubled the company’s capacity. The current annual clinker capacity of the
company stands at 3.0 mt, while the cement grinding capacity is 4.0 mt.
In its efforts to meet growing demand for cement in Saudi Arabia, the company is embarking
on the largest expansion plan in its history, which consists of construction of four plants to
boost total production capacity by 6 million tons in 2008. Qassim Cement will make the
necessary economic feasibility studies of these projects which were approved by the Saudi
Trade Ministry.
Revenue
The sales grew by 10% to SR543.1mn in 2006 from SR493.7mn in 2005. The higher revenue
in 2006 was mainly due to increase in the average realization (up by 9.3% on y-o-y basis). The
company sold 2.23mt of cement during the year, as compared to 2.21 mt sold in the previous
year. Simultaneously, the average realizations firmed up to SR243.6/tonne, as compared to
SR223.0/tonne in the previous year.

600
400
200
SR mn
-
Production
(200)
(400)
2005 2006
Expenditure
The cost of production increased to SR208.3mn in 2006 as compared to SR195.6mn in 2005.
Among the operating costs, the staff costs increased by 43.6% to SR10.7mn, while as a
percentage of sales they increased to 2.0% during the year, as against 1.5% of sales in 2005.
The general & administration expenses rose by 19.6% to SR3.8mn (0.7% of sales), up from
SR3.2mn (0.6% of sales) in the previous year.
Profitability
The gross profit of the company grew by 12.3% to SR334.8mn in 2006 from SR298.2mn
in 2005. The operating profit simultaneously went up 11.5% to SR319.5mn in 2006 from
SR286.5mn in 2005. The operating profit as a percentage of sales increased from 58.0 % in
2005 to 58.8% in 2006.
The net profit of the company increased by 12.1% to SR315.6mn in 2006 from SR281.5mn
in 2005. The net profit as a percentage of sales increased from 57.0% to 58.1% during the
period.

80
70
60
50
40
%
30
20
10
-
2003 2004 2005 2006

The return on average assets decreased from 19.4% in 2005 to 18.6% in 2006. But, the return
on average equity saw a rise from 24.5% to 25.4% in 2006.
Assets and Liabilities Structure

The improved performance in 2006 saw the total assets go up by 7.6% to reach SR1.76bn. The
trade receivables decreased by 6.9% to SR19.6mn, from SR21.1mn in 2005. The inventories
were down 5.1% to SR109.7mn on the back of a decline in cement stocks and spare parts.
The net fixed assets increased by 6.2% to SR369.3mn, from SR347.9mn in 2005.
On the liabilities side, the accounts payables increased by 37.5% during 2006 to SR5.3mn.
Other payables increased by 7.7% to SR188.5mn in 2006. The employees’ end-of-service
benefits increased by 9.9% to SR16.1mn during 2006.
Results for the First Nine Months of 2007
The revenue for Qassim Cement during the first nine months of 2007 stood at SR605.7mn.
The company had operating profit of SR383.5mn in the nine months of 2007, up 53.5% year-
on-year. Other Income was up 393.2% to SR18.8mn from SR3.8mn in first nine months of
06. Its net profit during the period at SR392.2mn was up 58.5% year-on-year. Consequently
the EPS for the nine months of 2007 was higher at SR8.72 as compared to SR5.50 in the nine
months of 2006.
Table 1: Results for First Nine Months of 2007

(SR ’000) 9M 2007 9M 2006 % Change
Sales 605,701 414,671 46.1%
Other Income 18,805 3,813 393.2%
Zakat (10,057) (6,341) 58.5%
Net Profit 392,216 247,290 58.5%
EPS (SR) 8.72 5.50 58.5%

Outlook and valuation:
The company expanded its capacity this year to 3.0mt and 4.0mt for clinker and cement
production respectively. The company is among the first to bring its additional capacity on
stream in the current round of expansions and, thus, has a first mover advantage working in
its favor. The company is expected to reap the benefits of the expanded capacity. However
lower cement prices projected from 2008 onwards could impact its revenues thereafter, offset
in part by the economies of the scaled up operations.
book value. Based on our expectations about the future potential of QCC, we have valued
QCC’s share price at SR157.9. The stock currently trades at SR145.00, which implies that the
market price. Hence we recommend “HOLD” on QCC’s stock.

BALANCE SHEET
42
QASSIM CEMENT COMPANY
Assets
Bank & cash equivalents 120,827 195,993 223,854 479,078 508,259 564,666 648,057
Inventories 134,771 115,669 109,720 131,113 145,542 147,799 151,468
Government bonds 356,733 - - - - - -
Investments for Trading - 11,639 8,479 13,479 63,479 113,479 163,479
Other current assets 9,418 7,976 10,352 10,662 10,982 11,312 11,651
Total Current Assets 651,935 352,329 371,993 670,836 767,398 878,233 1,017,439
Long Term Investment - - - 45,000 78,750 118,125 177,188

Net deferred charges 53,781 54,447 61,428 64,500 67,725 71,111 74,667
Projects Under Progress 249,921 876,441 952,511 - - - -
Less: Accumulated depreciation 708,682 663,411 700,620 752,703 822,341 894,232 968,207
Net fixed assets 310,295 347,914 369,326 1,299,754 1,300,116 1,293,225 1,279,250
Total Assets 1,265,932 1,631,131 1,755,258 2,080,090 2,213,989 2,360,694 2,548,543
Liabilities
Current portion of long-term loans - - 19,000 38,000 38,000 38,000 38,000

Other payables 55,943 174,968 188,488 181,061 191,690 195,833 199,402
Accrued Zakat 10,887 12,936 13,855 15,237 17,250 18,409 19,492
Provisions - - - 73 151 233 319
Dividends payable 14,678 18,203 18,007 92,703 59,581 53,937 50,394
Long-term loan 59,022 218,800 199,800 236,800 148,800 60,800 22,800

Owners’ Equity:
Paid-up equity capital 450,000 450,000 450,000 450,000 450,000 450,000 450,000
November 2007
General reserve 167,897 212,153 275,353 399,620 530,396 664,919 802,944
Owners’ Equity & Total Liabilities 1,265,932 1,631,131 1,755,258 2,080,090 2,213,989 2,360,694 2,548,543
OPERATING STATEMENT
Sales Revenue - 493,728 543,079 783,748 892,800 934,800 976,000
November 2007
Cost of Production - (195,559) (208,293) (279,735) (328,462) (341,300) (353,572)
Gross Profit 246,378 298,169 334,786 504,012 564,338 593,500 622,428
Staff Costs (7,060) (7,452) (10,699) (11,756) (12,946) (13,274) (13,566)
Distribution Expenses (614) (790) (638) (940) (1,161) (1,309) (1,464)
Provisions (38) (81) - (73) (78) (82) (86)

Depreciation (234) (187) (116) (234) (313) (323) (333)
Other Income 2,315 1,806 1,313 17,573 24,683 32,188 36,382
Revenue from Time Deposits & Investments 9,878 7,405 2,208 2,991 3,840 4,196 5,514
Foreign currency translation 4,173 (2,992) 629 - - - -
Insurance claims 3,129 - - - - - -
Income from Quoted Securities - - 878 1,732 3,982 6,232
Profit Before Zakat 255,455 292,695 323,677 507,905 575,006 613,643 649,738

Zakat (9,079) (11,173) (8,092) (15,237) (17,250) (18,409) (19,492)
Net Profit 246,376 281,522 315,585 492,668 557,756 595,234 630,246
Transfer to General Reserve (48,576) (44,076) (63,000) (124,267) (130,776) (134,523) (138,025)
Directors fees (1,800) (1,800) (1,800) (1,800) (1,800) (1,800) (1,800)
43
CASH FLOW STATEMENT
Operating
44
Net Profit 255,455 292,695 323,677 492,668 557,756 595,234 630,246
Depreciation 32,676 34,141 37,930 52,082 69,639 71,890 73,975
Other Income - - - (17,573) (24,683) (32,188) (36,382)
Provisions - - - 73 78 82 86
Other Income - Interest - - - (2,991) (3,840) (4,196) (5,514)
Income from Quoted Securities - - - (878) (1,732) (3,982) (6,232)
Amortization of deferred charges 5,614 7,243 7,188 - - - -
Zakat paid (7,123) (9,124) (7,173) - - - -
End of service indemnities paid (2,293) (1,350) (2,773) - - - -
Increase in indemnity provisions 2,237 2,481 4,224 803 843 886 930
Working Capital 23,817 146,492 20,006 (43,727) (4,239) 1,521 (885)
Dec/(inc.) in receivables (2,663) 10,576 (911) (16,916) (2,633) (1,841) (1,806)

Dec / (inc) in Inventories (2,832) 19,102 5,949 (21,393) (14,429) (2,256) (3,670)
Dec/ (inc) in other current assets - - - (311) (320) (329) (339)
Inc/(dec) in accounts payable 29,312 116,814 14,968 937 501 645 279
Inc/(dec) other current liabilities - - - (6,044) 12,642 5,303 4,651
Total Operating 310,383 472,578 383,078 480,457 593,823 629,247 656,226
Investing
Capex (10,948) (71,760) (59,342) (30,000) (70,000) (65,000) (60,000)
Increase in deferred expenses (166,904) (634,430) (90,239) - - - -
Inc. in investments 17,269 356,733 - (45,000) (33,750) (39,375) (59,063)

Other Income - - - 17,573 24,683 32,188 36,382
Net deferred charges - - - (3,071) (3,225) (3,386) (3,556)
Change in short-term investments (11,639) 3,160 (5,000) (50,000) (50,000) (50,000)
Other Income - Interest - - - 2,991 3,840 4,196 5,514
Income from Quoted Securities - - - 878 1,732 3,982 6,232
Total Investing (160,583) (361,096) (146,421) (61,629) (126,720) (117,396) (124,491)
Financing
Loans 59,022 159,778 - 56,000 (88,000) (88,000) (38,000)
Dividend (192,122) (194,475) (207,196) (217,804) (348,122) (365,644) (408,543)
Directors fees (1,540) (1,620) (1,600) (1,800) (1,800) (1,800) (1,800)
Total Financing (134,640) (36,317) (208,796) (163,604) (437,922) (455,444) (448,343)
Net Change in Cash 15,160 75,166 27,862 255,224 29,180 56,407 83,391
November 2007
Net Cash at beginning 105,667 120,827 195,993 223,854 479,078 508,259 564,666
Net Cash at end 120,827 195,993 223,854 479,078 508,259 564,666 648,057
FACT SHEET
2004 2005 2006 2007 (F) 2008 (F) 2009 (F) 2010 (F)
Liquidity Ratios
- Current Ratio (x) 7.4 1.7 1.5 2.0 2.4 2.8 3.2
- Quick Ratio (x) 5.9 1.1 1.1 1.6 2.0 2.3 2.7
Leverage Ratios
- Debt / Equity (x) 0.1 0.2 0.2 0.2 0.1 0.1 0.0

- EPS (SR) 5.5 6.3 7.0 10.9 12.4 13.2 14.0
- Dividend Payout Ratio (%) 78.5 70.3 65.6 59.4 56.5 60.5 64.3
- Market Price (SR) * 106.6 236.8 155.0 145.0 145.0 145.0 145.0
- P/E Ratio (x) 19.5 37.8 22.1 13.2 11.7 11.0 10.4
- P/BV (x) 4.3 9.0 5.4 4.4 3.8 3.3 3.0
- Dividend Yield (%) 4.0 1.9 3.0 4.5 4.8 5.5 6.2

SAUDI CEMENT COMPANY
Reuters Code:
3030.SE HOLD
Listing:
CMP:
SR100.25 (As on 6th Nov, 2007)

EPS (SR)* 6.7
BVPS (SR)* 24.4 Saudi Cement Company (SCC) was founded in
P / E (x)* 15.0 1955, with a plant in Hofuf. At the end of 1991,
P / BV (x)* 4.1 the company took over the Saudi-Bahraini Cement
Avg. daily vol.(‘000) 107.7 Company based in Ain Dar in the Eastern Province,
52 week Lo / Hi 78.00 / 106.00 which then had a capacity of 2mt of cement. It,
Market Cap (SR mn) 10,225.5 thus, has two plants – one in Ain Dar, about 90 km
Target Price (SR) 104.6 from Dammam, and the second in Hofuf, about 120
*Projected 2007. Price as on 6th Nov 07 km from Dammam. It has total clinker capacity
of 4.5mt. Its last capacity expansion came on stream in 1998. Earlier, in 1996, SCC had
completed an expansion of its Hofuf plant which raised its total cement capacity to 4.3mt.
The current cement capacity stands at 6.0mt, which is highest in Saudi Arabia at present.
SCC has plans to enhance its clinker capacity further to be able to retain its market share.
After the completion of the expansion project in 2008, the company’s cement capacity would
rise to 11.3 mt.
The company has six kilns in Hofuf – five with technology from Polysius, Germany; and one
with technology from KHD, Germany. Its Ain Dar plant has four kilns – all with technology
from Ishikawajima-Harima Heavy Industries Co. Ltd. (IHI), Japan. It has a 36% stake in its
Bahraini subsidiary, United Cement Company, through which the company markets cement
and clinker in Bahrain. Its location near the Arabian Gulf coast also enables SCC to export to
other GCC markets, especially Kuwait. The company has an export terminal at the Dammam
Port on the Arabian Gulf, where it has two storage domes – one each for clinker and cement
respectively. It is also setting up two small silos for domestic sales.
Saudi Cement Company is currently investing around SR2.2bn to step up production and
meet steadily rising local and regional demand. This would be one of the largest cement
projects in the world. The company’s board of directors has decided to expand the company’s
production at its Hofuf plant by constructing two complete new lines, each with a capacity of
10,000 tons of clinker per day. Under the Hofuf expansion, two new production lines, with a
total output capacity of 6.6 million tons of clinker annually, will be added to increase SCC’s
total production by around 160 percent from 2008 onwards.

Revenue
The sales grew by 7.5 % to SR1,200.2mn from SR1,116.3mn in 2006. The higher revenue
in 2006 was due to increase in the average realization (up by 8.3% on y-o-y basis). The
company sold 4.98mt of cement during the year, as compared to 5.01mt sold in the previous
year. Simultaneously, the average realizations firmed up to SR241.1/tonne, as compared to
SR223.0/tonne in the previous year.
Other Income
Among the non-operating income, interest income increased to SR24.5mn in 2006 from
SR20.1mn in 2005. Share in profit of associate companies increased by 53.9% to SR25.8mn
from SR16.8mn in 2005.

1,600
1,200
800
SR mn
400
-
Production
(400)
(800)
2005 2006
Expenditure
The cost of production decreased to SR524.2mn in 2006 as compared to SR587.6mn in 2005.

Among the operating costs, the staff costs remained almost stagnant at SR31.3mn. while
as a percentage of sales they decreased to 2.6% during the year, as against 2.8% of sales in
2005.
The general & administration expenses rose by 18.6% to SR7.8mn (0.7% of sales), from
SR6.6mn (0.6% of sales) in the previous year. The distribution expenses at SR13.9mn (1.2%
of sales) in 2006 were higher by 34.8% from SR10.3mn (0.9% of sales) in 2005.
Profitability
SR471.2mn in 2005. The operating profit as a percentage of sales went up from 42.2% in
2005 to 51.1% in 2006.

period. The EPS rose to SR6.3 in 2006, from SR4.7 in 2005.
The return on average assets increased from 21.7% in 2005 to 25.9% in 2006, following the
rise in the net profit during the year. Simultaneously, the return on average equity saw a rise
from 24.2% to 29.0%.
Chart 2: Profitability Ratio

70
60
50
40
%
30
20
10
-
2003 2004 2005 2006
The improved performance in 2006 saw the total assets go up by 22.3% to reach SR2.7bn.
The inventories were down 12.1% to SR213.4mn. The long-term investments rose by 12.5%
to SR55.3mn in 2006. The net fixed assets declined by 8.9% to SR1.04bn, on the back of
lower additions and higher depreciation charge during the year. On the liabilities side, the
accounts payable increased by 30.4% during 2006 to SR53.6mn. Other payables increased
by 23.2% to SR159mn in 2006.
The company had operational revenues of SR1028.5mn in the first nine months of 2007, up
by 12.3% as compared to nine months of 2006. The operating profit, which was SR503.3mn,
was up by 7.2 per cent on y-o-y basis. The company’s net profit during the nine months of
2007 at SR517.9mn was 7.2 per cent higher than SR483.1mn in the corresponding period of
2006, for a net profit margin of 50.3 per cent in nine months of ‘07. Similarly EPS was up by
7.2% at SR5.08 during the nine months’07 as compared to SR4.74 during the corresponding
period in 2006.

Table 1: Results for Nine Months of 2007

(SR ’000) 9M 2007 9M 2006 % Change
Sales 1,028,463 916,101 12.3%
Other Income (1,027) (5,308) -80.7%
Zakat (13,280) (12,400) 7.1%
Net Profit 517,912 483,116 7.2%
EPS (SR) 5.08 4.74 7.2%
The company is going for a huge expansion of its cement capacity from 6.0mt at present to
11.3mt. The expanded capacity is expected to go on stream by the beginning of 2008. Lower
cement prices projected from 2008 onwards could impact its revenues thereafter, offset to a
certain extent by the enhanced economies of scale.
book value. Based on our expectations about the future potential of SCC, we have valued
SCC’s share price at SR104.60. The stock currently trades at SR100.25, which implies that
the value arrived at using the weighted average method is around 4.3% higher than the current
market price. Hence we recommend a “HOLD” on SCC’s stock.

BALANCE SHEET
50
Assets
Murabahat - - 614,000 - - - -
Accounts receivables 78,930 107,530 149,652 163,580 169,140 172,355 178,215
Inventories 217,742 242,926 213,442 240,624 249,557 262,794 266,435
Other current assets 10,970 10,747 15,013 72,702 74,736 75,668 75,742
Total Current Assets 911,019 651,034 1,066,656 576,715 664,898 842,977 1,037,274

Net Good Will 20,128 12,076 4,024 - - - -
Work in Progress - 360,821 542,177 1,679,177 - - -
less: accumulated depreciation 2,538,478 2,657,494 2,775,620 2,909,257 3,075,512 3,274,384 3,475,774
Net fixed assets 1,266,852 1,138,753 1,036,414 977,777 2,615,699 2,491,827 2,360,437
Total Assets 2,248,302 2,211,866 2,704,581 3,291,744 3,341,577 3,398,832 3,464,941
Liabilities

Other current liabilities 116,259 129,102 158,989 189,966 202,344 218,995 235,090
Short-term Loan - - - 400,000 372,000 345,960 321,743
Owner’s Equity:
Paid-up equity capital 1,020,000 1,020,000 1,020,000 1,020,000 1,020,000 1,020,000 1,020,000
Voluntary reserve 70,000 70,000 70,000 70,000 70,000 70,000 70,000
November 2007
Total Liabilities & Owner’s Equity 2,248,302 2,211,866 2,704,581 3,291,744 3,341,577 3,398,832 3,464,941
OPERATING STATEMENT
November 2007
Sales 940,454 1,116,342 1,200,235 1,326,814 1,435,726 1,534,378 1,626,216
Cost of Sales (470,855) (587,575) (524,212) (586,077) (646,419) (717,161) (758,656)
Gross Profit 469,599 528,767 676,023 740,737 789,307 817,218 867,559
Staff Costs (30,486) (31,435) (31,305) (35,984) (38,938) (41,613) (44,104)
Distribution Expenses (13,371) (10,321) (13,914) (13,824) (14,959) (15,987) (16,944)

Depreciation (9,030) (9,169) (9,695) (9,811) (12,205) (14,600) (14,785)
Amortization (8,052) (8,052) (4,026) - - -
Add: Other Income /Expense 23,509 110 (2,969) 1,526 2,035 3,777 6,368
- Other Income - Interest 8,674 20,139 24,457 13,077 13,564 25,181 33,962
Share in profit of associate companies 13,021 16,765 25,802 27,866 30,095 32,503 35,103
Interest Costs (938) - - (7,000) (26,040) (24,217) (22,522)
Profit Before Tax 454,597 500,190 652,504 704,600 732,808 771,828 833,905

Zakat (17,095) (15,898) (14,745) (24,802) (25,648) (27,014) (29,187)
Net Profit 437,502 484,292 637,759 679,798 707,160 744,814 804,718
Op Balance of Retained Earnings 478,666 523,418 406,281 821,585 887,183 929,143 957,757
Trfr to Statutory Reserve (43,750) (48,429) (36,655) - - - -
Directors Fee (2,200) (2,200) (2,200) (2,200) (2,200) (2,200) (2,200)
Proposed Dividend (346,800) (550,800) (183,600) (612,000) (663,000) (714,000) (765,000)
Cl Balance of Retained Earnings 523,418 406,281 821,585 887,183 929,143 957,757 995,275
51
CASH FLOW STATEMENT
52
Operating
PBT 454,597 500,190 652,504 704,600 732,808 771,828 833,905
Depreciation 132,245 132,759 132,061 133,637 166,255 198,873 201,389
Interest received (8,674) - - - - - -
Other Income (20,139) (16,152) (1,526) (2,035) (3,777) (6,368)
Other Income - Interest - - - (13,077) (13,564) (25,181) (33,962)
Gain on sale of property, plant and eqpt (39) (480) 260 - - - -
Share in profit of associate companies - - (27,866) (30,095) (32,503) (35,103)
Income from associate companies (13,021) (16,765) (25,802) - - - -
Zakat Paid (6,238) (23,170) (13,415) (24,802) (25,648) (27,014) (29,187)
Indemnity 6,708 9,259 6,993 17,590 21,988 27,485 34,356

Indemnity Paid (6,391) (13,270) (8,620) - - - -
Working Capital 32,227 (32,013) 16,659 5,177 (2,644) 9,814 8,876
Dec/(inc.) in receivables 15,843 (28,600) (42,122) (13,928) (5,561) (3,214) (5,861)
Dec / (inc) in Inventories 20,843 (25,184) 29,484 (27,182) (8,934) (13,237) (3,641)
Dec/ (inc) in other current assets 1,059 (1,130) (2,455) (57,689) (2,034) (932) (74)
Inc/(dec) in accounts payable (1,409) 23,440 12,496 72,998 1,507 10,546 2,357
Inc/(dec) other current liabilities (4,109) (539) 19,256 30,977 12,378 16,651 16,095
Total Operating 591,414 536,371 744,488 800,733 873,105 943,741 996,429
Investing
Murabaha - - (614,000) 614,000 - - -

Capex (10,821) (357,429) (206,732) (1,212,000) (125,000) (75,000) (70,000)
Other Income - 1,526 2,035 3,777 6,368
Interest Income Received 6,585 21,492 14,341 13,077 13,564 25,181 33,962
Share in profit of associate companies - 27,866 30,095 32,503 35,103
Dividends received from associate companies 10,374 17,886 19,674 - - - -
Proceeds from disposal of property 41 480 3,446 - - - -
Net Acquisition Surplus - - - 4,024 - - -
Investments purchased - - - (2,766) (2,904) (3,049) (3,201)
Total Investing 6,179 (317,571) (783,271) (554,273) (82,210) (16,587) 2,231
Financing
Dividend (345,657) (530,146) (174,299) (612,000) (663,000) (714,000) (765,000)
Directors Fee (2,200) (2,200) (2,200) (2,200) (2,200) (2,200) (2,200)
November 2007
SIDF Loan Installments Paid (34,000) - - 400,000 (28,000) (26,040) (24,217)
Total Financing (381,857) (532,346) (176,499) (221,200) (719,240) (766,457) (813,939)
Net Change in Cash 215,736 (313,546) (215,282) 25,260 71,655 160,697 184,722
Net Cash at end 603,377 289,831 74,549 99,809 171,464 332,161 516,882
FACT SHEET
2004 2005 2006 2007 (F) 2008 (F) 2009 (F) 2010 (F)
Liquidity Ratios
- Current Ratio 6.8 3.8 5.0 0.8 0.9 1.2 1.5
- Quick Ratio 5.2 2.4 4.0 0.5 0.6 0.8 1.1
- Inventory stock (days) 176 143 159 141 138 130 127
- Receivables outstanding (days) 34 30 39 43 42 41 39
- Length of operating cycle 210 174 198 184 181 171 167
- Payables outstanding (days) 14 18 33 56 72 68 67
- Length of cash cycle 196 155 165 128 109 103 99
- Total Asset Turnover 0.4 0.5 0.5 0.4 0.4 0.5 0.5
- Total Net Fixed Asset Turnover 0.7 0.9 1.1 1.3 0.8 0.6 0.7
- Equity Turnover 0.5 0.6 0.5 0.5 0.6 0.6 0.6
Activity Ratios
- Inventory Turnover Ratio 2.1 2.6 2.3 2.6 2.6 2.8 2.9
- Debtor turnover Ratio 10.8 12.0 9.3 8.5 8.6 9.0 9.3
- Creditors Turnover Ratio 25.6 20.0 11.1 6.5 5.1 5.4 5.4
Leverage Ratios
- Current Liability/ Equity 0.1 0.1 0.1 0.3 0.3 0.3 0.3
- Total liabilities/ Assets 0.1 0.1 0.1 0.2 0.2 0.2 0.3
- Debt / Equity 0.0 0.0 0.0 0.2 0.1 0.1 0.1

- EPS (SR) 4.3 4.7 6.3 6.7 6.9 7.3 7.9
- Dividend Payout 79 114 29 90 94 96 95
- Market Price (SR)* 85.7 142.6 98.5 100.3 100.3 100.3 100.3
- P/E 20.0 30.0 15.8 15.0 14.5 13.7 12.7
- P/BV 4.3 7.4 4.1 4.1 4.0 4.0 3.9
- Dividend Yield (%) 4.0 3.8 1.8 6.0 6.5 7.0 7.5
* Market price for 2007 and subsequent years as on Nov 6, 2007

YANBU CEMENT COMPANY
Reuters Code:
3060.SE BUY
Listing:
CMP:
SR82.00 (As on 6th Nov, 2007)

EPS (SR)* 6.9
BVPS (SR)* 21.6 Yanbu Cement Company (YCC) is one of the
P / E (x)* 11.8 biggest cement producers in Saudi Arabia with the
P / BV (x)* 3.8 capacity. YCC was established in 1976 with initial
Avg. daily vol.(‘000) 141.7 production capacity of 3,000 tons of clinker per day,
52 week Lo / Hi 64.25 / 84.00 which was subsequently raised to 4,000 tons per
Market Cap (SR mn) 8,610.00 day. YCC commissioned two of its long dry kilns
Target Price (SR) 96.90 each 1,500tpd at Ras Baridi 60km north of the city
* Projected (2007) of Yanbu on the west coast of Saudi Arabia.
The company commissioned its third long dry kiln with a capacity of 1,000tpd in 1982 thus
increasing the total plant capacity. All three kilns were supplied, installed, and commissioned
by the German company KHD Humboldt Wedag Ag. The company further expanded its
capacity during 1998 by another 7,000 tpd clinker by setting up a new cement plant adjacent
to the old factory at Yanbu, thus having a total installed capacity of 11,500 tons of clinker
per day which is 3.5 million tons per annum. The company further increased the capacity to
reach 4.2mt of clinker in 2005. The company recorded cement production of 3.52mt in 2006
as compared to 3.74mt in the previous year. The company has a 60% stake in the Paper Sacks
Factory in Saudi Arabia.
Revenue
Sales grew by 8.3% to SR843.2mn in year 2006 from SR778.9mn in year 2005. The company
sold 3.52mt of cement during 2006 as compared to 3.74mt in 2005. However, revenue grew
owing to improvement of 15.5% in cement realization at average price of SR241.6/ton in
2006 as compared to SR209.3/ton in 2005.
Expenditure
The cost of production increased by 4.9% to reach SR317.3mn in 2006 as compared to
SR302.6mn in 2005. Among the operating costs, the staff costs increased by 3.1% to reach
SR12.9mn and as a percentage of sales they decreased to 1.5% during the year, as against 1.6%

of sales in 2005. The general & administration expenses rose by 26.9% to reach SR2.8mn
(0.33% of sales), from SR2.2mn (0.28% of sales) in the previous year. The distribution
expenses at SR2.4mn (0.29% of sales) in 2006 were lower by 14.6% from SR2.9mn (0.37%
of sales) in 2005.

1,000
800
600
400
SR mn
200
-
Production
(200)
(400)
2005 2006
Profitability
SR457.8mn in 2005. The operating profit as a percentage of sales rose from 58.8 % in 2005
to 60.1% in 2006.
period.

60
50
40
30
%
20
10
-
2003 2004 2005 2006

The return on average assets increased from 20.8% in 2005 to 22.8% in 2006, following a
rise of more than 12% in net profit. Similarly, the return on average equity saw a rise from
22.9% to 25.4% in 2006.
Asset base increased marginally by 0.3% to reach SR2.25bn in 2006. The trade receivables
increased by 3.6% to SR88.7mn, from SR85.6mn in 2005, while the inventories were up by
53.2% to SR102.7mn. The fixed assets decreased by 2.3% to reach SR1.61bn in 2006 from
SR1.65bn in 2005.
On the liabilities side, the accounts payable decreased by 88.9% during 2006 to reach SR5.6mn
as compared to SR50.6mn in 2005. Long-term loan decreased by 87.5% to reach SR14.0mn
as compared to SR111.7mn in 2005. Other liabilities increased by 59.2% to reach SR51.2mn
in 2006. The employee indemnity provision increased by 6.6% to reach SR24.0mn during
2006.

The revenue for Yanbu Cement during the nine months 2007 stood at SR908.6mn, up by
35.7% on y-o-y basis. The company had operating profit of SR548.4mn in the nine months of
2007, up 36.6% year-on-year. Other Income was up 38.6% to SR11.4mn, up from SR8.2mn
in the same period in 2006. Its net profit during the period was SR550.7mn was up 35.6%
year-on-year.

(SR ’000) 9M 2007 9M 2006 % Change
Sales 908,647 669,670 35.7%
Other Income 11,359 8,194 38.6%
Zakat (14,680) (9,281) 58.2%
Net Profit Before Minority Interest 552,109 406,317 35.9%
Minority Interest (1,416) (245) 478.0%
Net Profit 550,693 406,072 35.6%

The current cement capacity is around 4.8mt per annum. The company is also going to
benefit from the proximity to the port which reduces the distribution cost as well as cost
of importing the raw materials. The company seems to be well-positioned as the leading
manufacture of cement and will be benefited from the increase in government spending on
housing and infrastructure projects. The economies of scale after expansion are likely to
improve its margins which will further improve its profitability.

book value. Based on our expectations about the future potential of YCC, we have valued
YCC’s share price at SR96.90. The stock currently trades at SR82.00, which implies that the
market price. Hence we recommend “BUY” on YCC’s stock.

BALANCE SHEET
58
Assets:
Current assets:
Cash in fund and banks 370,488 88,580 42,767 107,192 128,690 127,500 155,801
Investment in funds - 240,240 286,811 311,811 336,811 111,811 101,811
Stock inventory and work in process 64,160 67,077 102,730 120,517 123,614 125,919 129,562
Spare parts and other material in stock 102,572 109,556 116,499 127,097 138,650 152,983 161,292
Long-term investments 7,500 - - - - - -

Projects under operation 80,162 277,574 55,584 - - - -
Plant and equipment 1,391,766 1,370,830 1,554,223 1,703,592 1,845,461 2,233,424 2,397,543
Deferred expenses 3,864 3,880 2,693 2,020 1,515 1,136 852
Total Assets 2,110,231 2,243,356 2,250,022 2,486,617 2,702,992 2,898,108 3,102,103
Liabilities:
Current liabilities:
Current portion of long-term loans 810 2,560 1,165 6,989 7,339 8,073 8,880
Trade payables 6,346 50,558 5,627 20,056 21,603 22,533 23,033
Profits for distribution 29,259 64,829 44,200 55,250 58,012 60,913 63,959
Zakat provision 12,218 11,866 12,896 16,120 16,926 17,772 18,660

Other liabilities 26,219 32,145 51,173 63,966 70,363 77,399 85,139
Long-term loan - 111,709 13,979 14,677 16,145 17,760 19,536

Total Liabilities 94,382 296,142 152,992 207,000 224,819 244,046 264,744
Owner’s Equity:
Paid-up equity capital 1,050,000 1,050,000 1,050,000 1,050,000 1,050,000 1,050,000 1,050,000
Statutory reserves 525,000 525,000 525,000 525,000 525,000 525,000 525,000
Retained earnings 440,849 367,264 509,765 689,899 885,511 1,057,868 1,236,928
November 2007
Total Owner’s Equity 2,015,849 1,942,264 2,084,765 2,264,899 2,460,511 2,632,868 2,811,928
Minority Interest - 4,950 12,265 14,718 17,661 21,194 25,432
Total Liabilities and Owner’s equity 2,110,231 2,243,356 2,250,022 2,486,617 2,702,992 2,898,108 3,102,103
OPERATING STATEMENT
Sales Revenue 774,622 778,930 843,243 1,159,761 1,265,177 1,395,970 1,471,786
November 2007
Cost of Production (324,923) (302,617) (317,329) (406,691) (438,051) (483,793) (525,445)
Gross Profit 449,699 476,313 525,914 753,070 827,126 912,177 946,341
General and administrative expenses (2,458) (2,195) (2,785) (4,062) (4,685) (5,448) (6,038)
Staff costs (11,279) (12,547) (12,941) (17,799) (19,417) (21,424) (22,588)
Distribution expenses (1,451) (2,854) (2,436) (3,350) (3,655) (4,033) (4,252)
Depreciation (840) (904) (894) (1,140) (1,242) (1,428) (1,621)

Finance expenses (847) (460) (1,399) (881) (969) (1,066) (1,172)
Other income 7,270 8,592 9,948 11,739 13,852 15,514 17,375
Net profit before Zakat 440,094 465,945 515,406 737,576 811,010 894,293 928,046
Insurance claims - - 8,661 9,960 - - -
Zakat (12,428) (12,380) (11,551) (20,652) (22,708) (25,040) (25,985)
Minority Interest 50 (314) 2,453 2,944 3,532 4,239
Net Profit 427,666 453,615 512,201 729,336 791,246 872,785 906,299

P&L Appropriation
Balance- beginning of the year 598,860 440,849 367,264 509,765 689,899 885,511 1,057,868
Net (income) for the year 427,666 453,615 512,201 729,336 791,246 872,785 906,299
Proposed dividend (367,500) (525,000) - (547,002) (593,434) (698,228) (725,039)
Dividends (distributed) - - (367,500) - - - -
Transferred statutory reserves (215,977) - - - - - -
Director’s fees (2,200) (2,200) (2,200) (2,200) (2,200) (2,200) (2,200)
Balance- End of the Year 440,849 367,264 509,765 689,899 885,511 1,057,868 1,236,928
59
CASH FLOW STATEMENT
Operating activities
60
Net income 427,666 453,615 512,201 729,336 791,246 872,785 906,299
Adjustment:
Provision for slow movement goods 4,078 4,756 7,693 - - - -
Depreciation 89,649 89,182 94,287 100,631 108,131 112,036 135,881
Gain on sale of property, plant and eqpt (50) (801) (7) - - - -
Amortization 3,596 1,095 1,186 673 505 379 284
Minority Interest (50) 314 2,453 2,944 3,532 4,239
Zakat provision 12,428 12,380 11,551 3,224 806 846 889
Extra Zakat provisions -
Total 539,723 563,123 628,704 842,306 908,123 994,744 1,053,531

Dec/(inc.) in receivables (16,919) 4,101 (3,095) (25,673) (13,863) (17,083) (9,909)
Dec / (inc) in Inventories 12,601 (2,918) (35,652) (17,787) (3,098) (2,304) (3,643)
Dec/ (inc) in other current assets (704) (11,740) (14,637) (10,598) (11,552) (14,334) (8,309)
Inc/(dec) in payables 459 44,212 (44,932) 14,429 1,547 930 500
Inc/(dec) other current liabilities 3,939 5,926 19,028 12,793 6,397 7,036 7,740
Net cash flow from operating activities before Zakat 539,099 602,703 549,416 815,471 887,552 968,989 1,039,911
Zakat (11,814) (12,733) (10,521) - - - -
Net Cash flow from Operating activities 527,285 589,971 538,895 815,471 887,552 968,989 1,039,911
Sale / (Purchase) of investments (7,500) - - - - - -

Investment in Mutual Funds (240,240) (46,571) (25,000) (25,000) 225,000 10,000
Projects under operation (78,964) (204,071) (36,987) 55,584 - - -
Purchase of plant and equipment (6,107) (61,587) (18,704) (250,000) (250,000) (500,000) (300,000)
Proceeds from sale of plant and equipment 53 801 7 - - - -
Net change in investments 12,500 7,000
Increase in deferred expenses (1,930) (1,111) - - - - -
Net cash flow from Investing activities (94,448) (493,707) (95,254) (219,416) (275,000) (275,000) (290,000)
Long-term loans - 111,709 (97,730) 699 1,468 1,615 1,776
Payment of long-term loan (49,443) 1,750 (1,395) 5,824 349 734 807
Dividend (361,792) (489,430) (388,129) (535,952) (590,672) (695,327) (721,994)
Directors fees (2,200) (2,200) (2,200) (2,200) (2,200) (2,200) (2,200)
November 2007
Net cash flow from Financing activities (413,435) (378,172) (489,454) (531,629) (591,055) (695,179) (721,610)
Net Change in Cash 19,402 (281,908) (45,813) 64,426 21,498 (1,190) 28,300
Net Cash at end 370,488 88,580 42,767 107,192 128,690 127,500 155,801
FACT SHEET
2004 2005 2006 2007 (F) 2008 (F) 2009 (F) 2010 (F)
Liquidity Ratios
- Current Ratio (x) 8.4 3.6 5.5 4.8 4.9 3.6 3.5
- Quick Ratio (x) 7.0 3.0 4.5 4.0 4.1 2.7 2.7
- Inventory stock (days) 79.2 79.1 97.7 100.2 101.7 94.1 88.7
- Receivables outstanding (days) 38.3 41.1 37.7 32.0 35.0 35.8 37.3
- Length of operating cycle (days) 117.4 120.2 135.4 132.1 136.7 129.9 126.0
- Payables outstanding (days) 6.9 34.3 32.3 11.5 17.4 16.6 15.8
- Length of cash cycle (days) 110.6 85.9 103.1 120.6 119.4 113.2 110.2
Leverage Ratios
- Debt / Equity (x) 0.00 0.06 0.01 0.01 0.01 0.01 0.01
- Total Assets Turnover (x) 0.4 0.4 0.4 0.5 0.5 0.5 0.5
- Total Net Fixed Assets Turnover (x) 0.5 0.6 0.6 0.7 0.7 0.7 0.6
- Equity Turnover (x) 0.4 0.4 0.4 0.5 0.5 0.5 0.5
Activity Ratios
- Inventory Turnover Ratio (x) 4.6 4.6 3.7 3.6 3.6 3.9 4.1
- Debtor turnover Ratio (x) 9.5 8.9 9.7 11.4 10.4 10.2 9.8
- Creditors Turnover Ratio (x) 53.1 10.6 11.3 31.7 21.0 21.9 23.1

- EPS (SR) 4.1 4.3 4.9 6.9 7.5 8.3 8.6
- Dividend Payout Ratio (%) 85.9 115.7 71.7 75.0 75.0 80.0 80.0
- Market Price (SR) * 95.0 145.4 71.8 82.0 82.0 82.0 82.0
- P/E Ratio (x) 23.3 33.7 14.7 11.8 10.9 9.9 9.5
- P/BV (x) 4.9 7.9 3.6 3.8 3.5 3.3 3.1
* Market price for 2007 and subsequent years as on Nov 6, 2007

YAMAMA SAUDI CEMENT COMPANY
Reuters Code:
3020.SE
HOLD
Listing:
CMP:
SR79.00 (As on 6th Nov, 2007)

EPS (SR)* 5.7
BVPS (SR)* 16.9 Yamama Saudi Cement Company (YSCC) ranks
P / E (x)* 13.8 among the biggest cement producers in the country
P / BV (x)* 4.7 and one of the earliest as well. It was founded in
Avg. daily vol.(‘000) 397.9 1961 in Riyadh city by H H Late Prince Mohammad
52 week Lo / Hi 70.00 / 98.50 Bin Saud Al-Kabir, with a capital of SR25mn,
Market Cap (SR mn) 10,665.0 to produce and sell cement. The commercial
Target Price (SR) 85.3 production started in 1966 with a 300tpd line. With
*Projected 2007. Price as on 6th Nov 07 time, YSCC expanded its plant capacity by adding
Source: Global Research new production lines. The first expansion was as
early as in 1972, when a line of 800tpd was added
to raise the total annual production up to 330,000 tonnes per year. The big jump came six
years later in 1978 when two production lines of 1,500tpd each were added, thus raising the
total capacity up to 1.23mt of clinker. A fifth kiln was added in 1982 to make the designed
capacity go as high as 1.68mt. In 1985, a fourth extension added a 3,000tpd pre-heating
(pre-calcining) short kiln. The most recent capacity addition in 2007 doubled the company’s
capacity. Today, YSCC has clinker capacity of 6.0mt and cement capacity of 6.5mt.
The company has grown hand-in-hand with the growth of the Riyadh region over the past 30
years. Whereas 300tpd of cement produced by Yamama were more than enough to satisfy
the demand in Riyadh, Qassim and Hail regions combined in the late-1960s, Yamama’s
current huge production does not even cover the demand of Riyadh city alone. The company
also has a paper bags unit, with a capacity to produce 30mn bags every year, for captive
consumption.
Financial Performance – 2006
Revenue
Sales grew by 20.1% to SR950.1mn, from SR791.0mn in 2005. The company sold 3.84mt
of cement during 2006, which was higher by 7.9% on y-o-y basis. Cement realization also
improved by 11.3% to SR246.8/ton. These two factors led to a healthy growth in revenue.


1,200
1,000
800
600
SRmn
400
200
-
(200)
Production
(400)
2005 2006
Expenditure
The cost of goods sold increased by 27.7% to reach SR318.6mn in 2006 as compared to
SR249.4mn in 2005. Among the operating costs, the staff costs decreased by 2.9% to reach
SR20.5mn. As a percentage of sales they decreased to 2.2% during the year, as against 2.7%
of sales in 2005. The general & administration expenses dipped by 16.1% to SR13.1mn
(1.4% of sales), from SR15.6mn (2.0% of sales) in the previous year.
Profitability
The gross profit of the company grew by 16.6% to reach SR631.6mn in 2006 from SR541.7mn
SR501.8mn in 2005. The operating profit as a percentage of sales dropped from 63.4 % in
2005 to 62.7% in 2006.
in 2005. The net profit as a percentage of sales remains the same as last year at 63.3%.

140
120
100
80
%
60
40
20
-
2003 2004 2005 2006


The return on average assets decreased from 21.5% in 2005 to 20.6% in 2006, owing to
increase in assets size (15.6% on y-o-y basis). Similarly, the return on average equity saw
a marginal decline from 34.3% to 34.2% in 2006, owing to 23% increase in shareholder
equity.

The improved performance in 2006 saw the total assets going up by 15.6% to reach SR3.13bn.
The trade receivables increased by 39.5% to reach SR247.9mn from SR177.7mn in 2005,
while the inventories were down 50.9% to SR29.5mn on the back of a decline in cement
stocks and spare parts.
On the liabilities side, the accounts payables increased by 35.4% during 2006 to reach
SR35.2mn. Other payables decreased by 22.1% to reach SR32.4mn in 2006. Dividend
payable was unchanged at SR270.0mn.
The Sales for YSCC grew by 21.6% in 9M-07 to reach SR920.7mn. The company had
operating profit of SR604.1mn in the nine months of 2007, up 24.4% year-on-year. Other
Income was down by 49.3% to SR7.9mn, from SR15.6mn in nine months of 2006. Its net
profit during the period at SR604.4mn was up 23.5% year-on-year. Consequently the EPS for
the period was higher at SR4.48 as compared to SR3.63 in the nine month period in 2006.

(SR ’000) 9M 2007 9M 2006 % Change
Sales 920,720 756,925 21.6%
Other Income 7,930 15,643 -49.3%
Zakat (15,000) (12,000) 25.0%
Net Profit 604,448 489,407 23.5%
EPS (SR) 4.48 3.63 23.5%
Source: Company Financials.
The most recent capacity addition in 2007 doubled the company’s capacity. Today, YSCC
has clinker capacity of 6.0mt and cement capacity of 6.5mt. Lower cement prices projected
after 2008 could impact its revenues, though it could be offset partly by enhanced economies
of scale.
book value. Based on our expectations about the future potential of YSCC, we have valued
YSCC’s share price at SR85.30. The stock currently trades at SR79.00, which implies that the
market price. Hence we recommend “HOLD” on YSCC’s stock.

BALANCE SHEET
Assets:
November 2007
Inventories 69,049 60,078 29,527 35,775 38,129 38,855 39,655
Other current assets 499 622 1,694 38,952 42,847 47,132 51,845
Total Current Assets 541,425 803,360 538,770 708,618 803,902 903,272 1,034,844
Capital work-in-progress 812,649 1,166,519 1,542,737 - - - -
Deferred charges after amortization 22,900 21,225 18,694 28,041 26,639 25,307 24,042
Less: Accumulated depreciation 1,815,021 1,827,000 1,864,937 1,918,041 1,984,666 2,064,144 2,156,977
Net fixed assets 255,319 635,976 823,957 2,473,590 2,506,966 2,527,487 2,534,655
Total Assets 1,960,097 2,706,197 3,127,862 3,485,248 3,667,505 3,868,565 4,109,163
Liabilities:
Current Portion (LTD) - - 60,000 60,000 60,000 60,000 60,000
Other current liabilities 46,231 41,625 32,409 32,522 34,439 32,379 35,406
Dues to shareholders 18,275 20,682 30,828 - - - -

Provisions for Zakat 17,561 19,480 17,743 19,518 21,470 23,617 25,978
Dividend Payable 270,000 270,000 270,000 472,500 540,000 607,500 675,000
Long-term loan 200,000 709,760 701,247 525,935 315,561 157,781 63,112

Owners’ Equity:
Paid-up equity capital 450,000 450,000 1,350,000 1,350,000 1,350,000 1,350,000 1,350,000
Capital reserve 7,401 7,401 - - - - -
Additional reserve 550,000 800,000 457,935 582,935 682,935 782,935 882,935
65
Unrealized gain from investment - - 33,688 84,219 92,641 97,273 102,136
Total Owners’ Equity & Liabilities 1,960,097 2,706,197 3,127,862 3,485,248 3,667,505 3,868,565 4,109,163
66
OPERATING STATEMENT
Sales Revenue NA 791,087 950,121 1,204,125 1,337,050 1,404,000 1,481,675

Cost of Production NA (249,433) (318,560) (395,689) (448,933) (472,737) (516,931)
Gross Profit 436,303 541,653 631,561 808,436 888,117 931,263 964,744
Staff Costs (21,581) (21,067) (20,465) (24,732) (26,125) (27,433) (28,951)
Distribution Expenses (749) (524) (637) (807) (896) (941) (993)

Depreciation (1,924) (2,725) (1,890) (3,540) (4,442) (4,542) (4,642)
Other Income 7,134 9,542 19,255 17,409 18,802 20,306 21,931
Investment Income/ (Loss) 5,991 5,580 2,398 14,361 15,125 18,562 23,203
Profit on disposal of investments 144,810 - 3 - - - -
Zakat (16,000) (16,000) (16,000) (23,364) (26,417) (27,807) (28,854)
Net Profit 542,228 500,883 601,159 771,206 847,115 891,507 927,546

Transfer to Statutory Reserve - - (60,116) (77,121) (84,712) (89,151) (92,755)
Transfer to Additional Reserve (250,000) (250,000) (250,000) (125,000) (100,000) (100,000) (100,000)
Directors fees (1,800) (1,800) (2,400) (2,400) (2,400) (2,400) (2,400)
November 2007
CASH FLOW STATEMENT
Operating
Depreciation 13,017 13,288 38,774 53,104 66,624 79,479 92,833
Gain from sale of investments (144,810) - - - - -
Gain on sale of property, plant and eqpt (8) 980 (783) - - - -
Other Income - - - (17,409) (18,802) (20,306) (21,931)
Investment income from associates - - (898) (14,361) (15,125) (18,562) (23,203)
Interest costs - - - - - - -
November 2007
Directors fees (1,800) (1,800) (2,400) (2,400) (2,400) (2,400) (2,400)
Zakat paid (16,889) (14,081) (17,736) (21,589) (24,465) (25,660) (26,492)
Amortization of deferred charges 5,672 6,997 6,522 (9,347) 1,402 1,332 1,265
Indemnity 5,013 2,447 5,179 4,165 2,291 2,405 2,526
Indemnity (Paid) - - (5,856) - - - -
Working Capital 13,557 9,287 (40,698) (51,322) (9,316) (18,219) 6,693
Dec/(inc.) in receivables (18,857) (44) (70,176) (16,065) (10,818) (13,757) 4,336

Dec / (inc) in Inventories 38,233 8,970 30,551 (6,248) (2,354) (727) (800)
Dec/ (inc) in other current assets (7,594) (4,733) (1,071) (37,258) (3,895) (4,285) (4,713)
Inc/(dec) in accounts payable 1,642 5,062 9,216 8,135 5,835 2,609 4,843
Inc/(dec) other current liabilities 132 32 (677) 114 1,916 (2,059) 3,027
Inc/(dec) other current liabilities - - (8,540) - - - -
Total Operating 431,980 534,000 599,263 735,410 873,741 917,382 985,691
Investing
Capex (10,525) (406,216) (207,605) (1,702,737) (100,000) (100,000) (100,000)
Change in capital work in progress (527,847) (353,870) (376,218) 1,542,737 - - -

Proceeds from disposal of Investments 18,757 - - - - -
Proceeds from disposal of property 8 826 3 - - - -
Other Income - - - 17,409 18,802 20,306 21,931
Investment Income/ (Loss) - - - 14,361 15,125 18,562 23,203
Changes in deferred charges (10,874) (5,322) (3,991) - - - -
Change in investments (16,500) (891) - (71,296) (55,000) (82,500) (103,124)
Unrealized gains from Investments - - - 50,531 8,422 4,632 4,864
Sale / (Purchase) of investments available for sale (21,856) 249,577 (90,000) - - - -
Change in spare parts & inventory (5,415) (3,520) (2,669) - - - -
Changes in letters of credit (14,593) 13,986 (15,700) - - - -
Total Investing (588,845) (505,430) (696,181) (148,994) (112,651) (138,999) (153,127)
Financing
67
Dividend (266,800) (267,593) (259,855) (270,000) (472,500) (540,000) (607,500)
Loans 200,000 509,760 51,487 (175,312) (210,374) (157,781) (94,668)
Dues to shareholders - - - (30,828) - - -
Total Financing (66,800) 242,167 (208,368) (476,139) (682,874) (697,781) (702,168)
Net Change in Cash (223,665) 270,737 (305,286) 110,276 78,216 80,602 130,395
Net Cash at end 294,246 564,983 259,698 369,973 448,190 528,792 659,187
FACT SHEET
2004 2005 2006 2007 (F) 2008 (F) 2009 (F) 2010 (F)
Liquidity Ratios
- Current Ratio (x) 1.5 2.1 1.2 1.1 1.1 1.2 1.2
- Quick Ratio (x) 1.3 2.0 1.1 1.1 1.1 1.1 1.2
- Inventory stock (days) NA 94 51 30 30 30 28
- Receivables outstanding (days) NA 82 82 78 74 73 71
- Length of operating cycle NA 176 133 108 104 103 98
- Payables outstanding (days) NA 34 35 36 38 39 38
- Length of cash cycle NA 142 98 71 66 64 60
- Total Asset Turnover NA 0.3 0.3 0.4 0.4 0.4 0.4
- Total Net Fixed Asset Turnover NA 1.8 1.3 0.7 0.5 0.6 0.6
- Equity Turnover NA 0.5 0.5 0.6 0.5 0.5 0.5
- Gross Profit Margin (%) NA 68.5 66.5 67.1 66.4 66.3 65.1
Activity Ratios
- Inventory Turnover Ratio NA 4 7 12 12 12 13
- Debtor turnover Ratio NA 4 4 5 5 5 5
- Creditors Turnover Ratio NA 11 10 10 10 9 10
Leverage Ratios
- Current Liability/ Equity (x) 0.3 0.2 0.2 0.3 0.3 0.3 0.3
- Total liabilities/ Assets (x) 0.3 0.4 0.4 0.3 0.3 0.3 0.2
- Debt-Equity Ratio (x) 0.1 0.5 0.4 0.3 0.1 0.1 0.0

- EPS (SR) 4.0 3.7 4.5 5.7 6.3 6.6 6.9
- Dividend Payout (%) 49.8 53.9 56.1 61.3 63.7 68.1 72.8
- Market Price (SR) * 62.2 156.0 78.5 79.0 79.0 79.0 79.0
- P/E Ratio 15.5 42.0 17.6 13.8 12.6 12.0 11.5
- P/BV 6.2 13.4 5.5 4.7 4.1 3.7 3.4
- Dividend Yield (%) 3.2 1.4 2.5 4.4 5.1 5.7 6.3

Southern Province Cement Company

Reuters Code:
3050.SE NOT
Listing:
RATED
CMP:
SR77.50 (As on 6th Nov, 2007)

EPS (SR)* 4.5
BVPS (SR)* 13.7 Southern Province Cement Company (SPCC) is one
P / E (x)* 16.4 of the bigger players in the Saudi cement sector with
P / BV (x)* 5.3 the current cement capacity of 4mt. The company
Avg. daily vol.(‘000) 102.8 was founded in 1978, and operates 2 plants, one
52 week Lo / Hi 65.25 / 82.50 in Jizan and other in Bishah with the total annual
Market Cap (SR mn) 10,850.0 cement production capacity of around 4mtpy.
Target Price (SR) NOT RATED
The company located its second plant in Bishah,
in mountainous region instead of expanding its
* 2006
existing production facility at Jizan, where it did not
add another production line. In this way the company was able to supply cement to the area
around Bishah at a considerably lower price because of the reduced transportation costs, over
mountainous roads in Aseer Region.
Revenue
The sales grew marginally by 0.2% to SR1,026.3mn in 2006 from SR1,023.7mn in 2005.
The company sold 4.58mt of cement during 2006, which was at the same level as in 2005.
Cement realization was also at similar level at SR224/ton as compared to SR223/ton in 2005.
These two factors resulted in almost flat growth of 0.2% only in 2006.

1,200
1,000
800
600
SRmn
400
200
-
(200) Sales Revenue Cost of Gross Profit Net Profit
Production
(400)
2005 2006

Expenditure

SR17.9mn and as a percentage of sales they decreased to 1.7% during the year, as against
1.8% of sales in 2005. The general & administration expenses dipped by 4.5% to SR3.3mn,
from SR3.4mn in the previous year.
Profitability
The gross profit of the company decreased by 1.6% to reach SR632.7mn in 2006 from
SR643.1mn in 2005. The operating profit simultaneously decreased by 1.5% to SR607.2mn
in 2006 from SR616.6mn in 2005. The operating profit as a percentage of sales dropped
from 60.2 % in 2005 to 59.2% in 2006. The net profit of the company increased by 1.5% to
SR624.2mn in 2006 from SR615.0mn in 2005. The net profit as a percentage of sales was
higher as compared to last year at 60.8%.
The return on average assets decreased from 28.4% in 2005 to 26.4% in 2006, owing to
increase in assets size (11.7% on y-o-y basis). Similarly, the return on average equity saw
a decline from 35.4% in 2005 to 33.0% in 2006, owing to 11.6% increase in shareholders’
equity.

70
60
50
% 40
30
20
10
-
2003 2004 2005 2006

The inventories were up by 30.8% to SR69.2mn on the back of a growth in cement stocks and
spare parts. On the liabilities side, the accounts payables increased by 30.6% during 2006 to
reach SR59.5mn. Dividend payable increased by 19.8% to reach SR151.2mn. Total liabilities
was up by 12.8% to reach SR290.2mn in 2006.

The sales of SPCC grew by 12.5% in 9M-07 to reach SR886.6mn. Other Income was down
by 14.8% to SR29.1mn, from SR34.1mn in 9M2006. Its net profit during the period at
SR549.0mn was up 12.5% year-on-year. Consequently the EPS for 9M2007 was higher at
SR3.92 as compared to SR3.49 in 9M2006.

(SR ‘000) 9M 2007 9M 2006 % Change
Sales 886,601 787,862 12.5%
Other Income 29,107 34,147 -14.8%
Zakat (14,474) (13,008) 11.3%
Net Profit 549,046 488,152 12.5%
EPS (SR) 3.92 3.49 12.5%
Outlook
SPCC, being one of the largest companies in the sector, seems to be getting the maximum
benefit of the surging demand for cement and looks well-positioned to take advantage of
the current economic boom. The company is looking at expanding its capacity as well as
improving its gross profit through reduced cost of operation. It intends to establish new
plant near the area which has easy availability of the basic raw materials required for the
production of cement. The company is well-capitalized and financially flexible to raise
additional resources without affecting the financial position. The company also hedges from
being centralized as it plans to have 3 plants in different areas which will in turn reduce the
transportation cost.

BALANCE SHEET
SOUTHERN PROVINCE CEMENT COMPANY
Amounts in SR ‘000 2004 2005 2006
Assets:
Current assets:
Cash and cash equivalents 114,675 39,824 26,894
Deposits 540,238 638,392 -
Murabahat - - 720,825
Current investments 321,766 - -
Prepaid expenses and other debit balances 26,687 31,890 40,529
Inventories 69,014 52,907 69,198
Total Current Assets 1,072,379 763,014 857,445
Non-current assets:
Investments 36,905 365,749 117,756
Property and equipment 984,035 1,095,130 1,505,917
Deferred charges 4,412 5,881 9,602
Total non-current 1,025,353 1,466,761 1,633,274
Total Assets 2,097,732 2,229,775 2,490,720
Liabilities:
Current liabilities:
Accounts payable 35,485 45,592 59,525
Dividends Payable 94,660 126,193 151,236
Zakat 23,225 33,811 23,277
Total Current Liabilities 153,369 205,595 234,038
End-of service Indemnity 46,772 51,576 56149.487
Total Liabilities 200,141 257,171 290,187
Owner’s Equity:
Paid-up capital 1,050,000 1,050,000 1,400,000
Statutory reserve 525,000 525,000 515,869
Poposed Dividends 294,000 105,000 280,000
Retained earnings 22,278 278,446 -
Unrealized earnings from investments 6,313 14,157 4,664
Total Owner’s Equity 1,897,591 1,972,603 2,200,532
Total Liabilities and Owner’s equity 2,097,732 2,229,775 2,490,720

OERATING STATEMENT
Amounts in SR ‘000 2004 2005 2006
Sales Revenue 929,202 1,023,717 1,026,274
Cost of Production (356,826) (380,582) (393,527)
Gross Profit 572,377 643,135 632,748
Staff Cost (15,572) (18,567) (17,933)
Selling and distribution expenses (6,636) (2,410) -
General and administrative expenses (3,220) (3,422) (3,269)
Depreciation (2,158) (2,131) (2,212)
Payment of deferred expenses (649) - -
Prior years expenses - - (2,096)
Operating Profit 544,142 616,606 607,237
Other income 2,794 517 1,170
Investment income 10,173 14,851 32,866
Interest Income 10,163 20,625 9,333
Gain on sale of fixed assets 5,276 452 102
Other expenses (4,435) (6,232) (3,209)
Net profit before Zakat 568,113 646,819 647,499
Zakat (22,375) (31,851) (23,277)
Net Profit 545,738 614,969 624,222
P&L Appropriation Account

Balance- beginning of the year 3,433 22,278 278,446
Net (income) for the year 545,738 614,969 624,222
Capital Increase - - (278,446)
Dividend distributed (231,000) - -
Semi-Annual Dividends (Distributed) (294,000) (252,000) (280,000)
Directors fees (1,800) (1,800) (1,800)
Proposed Dividends - (105,000) (280,000)
Unrealized earnings (93) - (62,422)
Balance- End of the Year 22,278 278,446 (0)

CASH FLOW STATEMENT

Amounts in SR ‘000 2004 2005 2006
Operating Activities
Net income before Zakat 568,112 646,819 647,499
Adjustment:
Depreciation 73,670 73,772 78,397
Amortization of deferred charges 649 - -
Provision for Doubtful Debt 2,274 - -
End of service indemnities 6,087 11,078 7,505
Income from investment (20,236) (35,477) (32,866)
Gain on disposal of property and equipment (5,276) (452) (102)
Total 625,279 695,741 700,433
Account receivables 3,171 (5,203) (8,638)
Inventories (3,048) 16,106 (16,290)
Accounts payable 4,940 10,218 13,934
Cash from operations 630,342 716,862 689,438
Zakat paid (17,283) (21,375) (33,811)
End-of-service indemnities paid (2,932) (6,274) (2,932)
Net Cash from Operating activities 610,127 689,213 652,695
Sale / (Purchase) of investments 1,990 - 166,194
Investment income 24,440 36,243 32,866
(Purchase) of fixed asset (42,748) (184,903) (489,183)
Proceeds from fixed assets 5,276 488 102
Addition to deferred charges (3,809) (1,469) (3,721)
Net cash flow from Investing activities (14,851) (149,642) (293,741)
Dividends paid (630,724) (514,467) (359,957)
Directors fees (1,800) (1,800) (1,800)
Net cash flow from Financing activities (632,524) (516,267) (361,757)
Net Change in Cash and cash equivalents (37,248) 23,304 (2,803)
Cash and cash equivalents, January 1 692,161 654,913 678,217
Cash and cash equivalents, December 31 654,913 678,217 675,413

FACT SHEET
2004 2005 2006
Liquidity Ratios
- Current Ratio (x) 7.0 3.7 3.7
- Quick Ratio (x) 6.5 3.5 3.4
- Return on Average Assets (%) 25.6 28.4 26.4
- Return on Average Equity (%) 34.2 35.4 33.0
- Return on Common Capital (%) 52.0 58.6 51.0
- Operating Profit Margin (%) 58.6% 60.2% 59.2%
- Net Profit Margin (%) 58.7% 60.1% 60.8%
Leverage Ratios
- Current Liability / Equity (x) 0.1 0.1 0.1

- EPS (SR) 3.9 4.4 4.5
- Book Value Per Share (SR) 11.5 13.3 13.7
- Market Price (SR) 79.8 117.5 73.0
- P/E Ratio (x) 20.5 26.7 16.4
- P/BV (x) 7.0 8.8 5.3

Tabuk Cement Company

Reuters Code:
3090.SE NOT
Listing: RATED
CMP:
SR33.25 (As on 6th Nov, 2007)

EPS (SR)* 3.1
BVPS (SR)* 12.0 Tabuk Cement Company (TCC) is among the
P / E (x)* 10.4 smaller players in the Saudi cement market with
P / BV (x)* 2.7 the current capacity of around 1.4mt. The company
Avg. daily vol. (‘000) 638.3 was founded in 1994 with the construction of a
52 week Lo / Hi 29.75 / 46.08 turnkey cement plant to serve the far north west of
Market Cap (SR mn) 2,992.5 the Kingdom. The plant is located south of Duba
Target Price (SR) NOT RATED port on the coast of the red sea, 25km north of Duba
* 2006 city, which is 180 km away from Tabuk province.
Its strategic location enables it to cater to the demand for cement in the northern regions of
the Kingdom and also for export to other countries.
The plant has its own 45MW Power Plant and 1500m3/day desalination plant, to provide
power and water for the cement plant and housing complex. Commercial sales of cement
started in 1998. The basic raw materials deposit of limestone is located adjacent to the plant
site while the main corrective material is available 21 km off the plant site. The additives,
iron ore and sand, along with gypsum are transported by contractors from different mines
under the lease of TCC.
Revenue
The sales grew by 25.0% to SR380.1mn from SR304.0mn in 2005. The company sold 1.63mt
of cement during 2006, which was higher by 14.1% on y-o-y basis. Cement realization also
improved by 9.6% to SR233.5/ton. These two factors led to a healthy growth in revenue.


400
300
200
SRmn
100
-
(100) Production
(200)
2005 2006
Expenditure
SR7.1mn and as a percentage of sales they decreased to 1.9% during the year, as against
2.8% of sales in 2005. The general & administration expenses dipped by 12.7% to SR5.0mn
(1.3% of sales), from SR5.7mn (1.9% of sales) in the previous year.
Profitability
The gross profit of the company grew by 32.4% to reach SR226.2mn in 2006 from SR170.9mn
SR155.8mn in 2005. The operating profit as a percentage of sales was up from 51.3% in 2005
to 56.1% in 2006. The net profit of the company increased by 40.5% to SR217.5mn in 2006
from SR154.8mn in 2005. The net profit as a percentage of sales was higher as compared to
last year at 57.2% (50.9% in 2005).

35
30
25
20
%
15
10
0
-
2003 2004 2005 2006


The return on average assets increased from 14.4% in 2005 to 19.9% in 2006, owing to
increase in net profit. Similarly, the return on average equity saw a rise from 18.9% to 26.2%
in 2006.

The trade receivables decreased by 33.3% to reach SR4.7mn from SR7.0mn in 2005, while
the inventories were down 11.1% to SR97.2mn. On the liabilities side, the accounts payables
increased by 60.0% during 2006 to reach SR27.6mn. Total liabilities were up by 50.1% to
reach SR315.8mn as compared to SR210.3mn in 2005.
The sales of the company decreased by 13.5% in the first nine months of 2007 to reach
SR265.1mn. The company had operating profit of SR162.9mn in the nine months of 2007,
down by 8.0% year-on-year. Other Income was up by 117.0% to SR16.3mn, from SR7.5mn
in the corresponding period of 2006. Its net profit during the period at SR174.7mn was down
2.9% from the previous year.

(SR ’000) 9M 2007 9M 2006 % Change
Sales 265,085 306,378 -13.5%
Operating Profit 162,914 177,119 -8.0%
Other Income 16,292 7,507 117.0%
Profit Before Zakat 179,206 184,626 -2.9%
Zakat (4,480) (4,616) -2.9%
Net Profit 174,726 180,010 -2.9%
Outlook
TCC, though a smaller player in cement industry, will still benefit from the current boom
being experienced by the Saudi economy. The company has reported strong sales and profits
growth last year but we do not expect the growth rates to be at the same levels as the company
is already doing production at 100% capacity utilization.

BALANCE SHEET
TABUK CEMENT COMPANY
Amounts in SR ‘000 2004 2005 2006
Assets:
Current assets:
Cash and bank balances 6,345 8,992 9,718
Short- term investments 127,300 70,500 215,562
Account receivables and others 24,033 6,994 4,668
Prepayment and other assets 4,625 2,429 3,112
Inventories 103,935 109,278 97,153
Total Current Assets 266,239 198,193 330,213
Investments 18,000 27,615 67,500

Fixed assets-net 772,156 792,038 741,536
Capital work in progress 42,602 256 2,338
Deferred charges-net 17,335 16,636 12,601
Total Assets 1,116,332 1,034,737 1,154,189
Liabilities:
Accounts payable and other 17,003 17,257 27,595
Dividends payable and other accruals to 28,469 42,972 76,048
the shareholders
Dividends proposed 105,000 140,000 200,000
Current portion of long-term loan 105,000 - -
Provision for Zakat and tax 3,793 4,194 5,817
Total Current Liabilities 259,266 204,423 309,459
Long-term loan 40,000 - -

Employee Indemnity Provision 5,467 5,888 6,297
Total Liabilities 304,733 210,311 315,756
Owners’ Equity:
Paid-up equity capital 700,000 700,000 700,000
Statutory reserve 45,517 60,999 82,754
Retained earnings 66,083 63,225 55,679
Unrealized gains - 201 -
Total Shareholder’s Equity 811,599 824,426 838,433
Owners’ Equity & Total Liabilities 1,116,332 1,034,737 1,154,189

OPERATING STATEMENT
Amounts in SR ‘000 2004 2005 2006
Sales Revenue 284,113 303,979 380,077

Cost of Production (141,856) (133,089) (153,860)
Gross Profit 142,257 170,890 226,218
General & Administrative Expenses (5,386) (5,728) (5,000)
Staff Costs (9,048) (8,400) (7,066)
Distribution Expenses (162) (202) (113)
Depreciation (759) (731) (785)
Operating Profit 126,903 155,828 213,253
Other Income 5,045 820 2,157
Investment Income 2,484 4,338 7,761
Gain/Loss from sale of fixed assets 51 380 -
Financing expenses (2,566) (2,540) -
Profit Before Tax 131,917 158,826 223,172
Zakat (3,326) (4,001) (5,623)
Net Profit 128,590 154,825 217,548

Opening Balance of Retained Earnings 57,351 66,083 63,225
Net Profit for the year 128,590 154,825 217,548
Transfer to Statutory Reserve (12,859) (15,483) (21,755)
Directors fees (2,000) (2,200) (2,200)
Proposed Cash Dividend (105,000) (140,000) (200,000)
Closing Balance of Retained Earnings 66,083 63,225 55,679

CASH FLOW STATEMENT

Amounts in SR ‘000 2004 2005 2006
Operating activities 371,813 460,995 589,771
Net income 128,590 154,825 217,548
Adjustment:
Depreciation 56,537 60,254 58,519
Amortization of fixed assets 3,235 3,306 4,554
Provision for staff indemnities 1,505 1,164 1,757
Provision for Zakat and tax 3,326 4,001 5,623
Total 193,194 223,551 288,002
Account receivables and others (20,845) 19,236 1,642
Inventories 6,270 (5,343) 12,125
Accounts payable and others (2,161) (1,946) 8,137
Cash from operations 176,458 235,498 309,906
Zakat paid (2,376) (3,600) (4,001)
End-of-service indemnities paid (363) (743) (1,348)
Net Cash from Operating activities 173,719 231,155 304,557
Investments (17,600) 47,386 (185,148)
Acquisition of fixed assets (1,323) (80,136) (8,017)
Capital work in progress (18,515) 42,346 (2,083)
Deferred charges (747) (2,607) (520)
Net cash flow from Investing activities (38,184) 6,989 (195,768)
Long-term loan (70,000) (145,000) -
Dividends paid (62,378) (90,497) (108,063)
Net cash flow from Financing activities (132,378) (235,497) (108,063)
Net Change in Cash and cash equivalents 3,156 2,647 726

Cash and cash equivalents, January 1 3,189 6,345 8,992
Cash and cash equivalents, December 31 6,345 8,992 9,718

FACT SHEET
2004 2005 2006
Liquidity Ratios
- Current Ratio (x) 1.0 1.0 1.1
- Quick Ratio (x) 0.6 0.4 0.8
- Inventory stock (days) 275.5 292.4 244.9
- Receivables outstanding (days) 23.9 18.6 5.6
- Length of operating cycle (days) 299.4 311.0 250.5
- Payables outstanding (days) 44.0 47.0 53.2
- Length of cash cycle (days) 255.4 264.0 197.3
- Total Assets Turnover (x) 0.3 0.3 0.3
- Total Net Fixed Assets Turnover (x) 0.4 0.4 0.5
- Equity Turnover (x) 0.4 0.4 0.5
- Gross Profit Margin (%) 50.1 56.2 59.5
- Operating Margin (%) 44.7 51.3 56.1
- Net Profit Margin (%) 45.3 50.9 57.2
- Return on Average Assets (%) 11.5 14.4 19.9
- Return on Average Equity (%) 16.1 18.9 26.2
- Return on Common Capital (%) 18.4 22.1 31.1
Activity Ratios
- Inventory Turnover Ratio (x) 1.3 1.2 1.5
- Debtor turnover Ratio (x) 15.3 19.6 65.2
- Creditors Turnover Ratio (x) 8.3 7.8 6.9
Leverage Ratios
- Current Liability / Equity (x) 0.3 0.2 0.4
- Debt / Equity (x) 0.2 0.0 0.0

- EPS (SR) 1.8 2.2 3.1
- Book Value Per Share (SR) 11.6 11.8 12.0
- Market Price (SR) 49.9 97.1 32.3
- P/E Ratio (x) 27.2 43.9 10.4
- P/BV (x) 4.3 8.2 2.7

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The following is a comprehensive list of disclosures which may or may not apply to all our researches.
Only the relevant disclosures which apply to this particular research has been mentioned in the table
below under the heading of disclosure.
Disclosure Checklist
Company Recommendation Ticker Price Disclosure
Arabian Cement Company HOLD 3010.SE SR93.00 1,10
Eastern Province Cement Company BUY 3080.SE SR80.50 1,10
Qassim Cement Company HOLD 3040.SE SR145.00 1,10
Saudi Cement Company HOLD 3030.SE SR100.25 1,10
Yanbu Cement Company BUY 3060.SE SR82.00 1,10
Yamama Saudi Cement Company HOLD 3020.SE SR79.00 1,10
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or anyone else for the preparation of this report.
2. The company being researched holds more than 5% stake in Global Investment House.
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4. Global Investment House acts as a corporate broker or sponsor to this company.
5. The author of or an individual who assisted in the preparation of this report (or a member of his/her
household) has a direct ownership position in securities issued by this company.
6. An employee of Global Investment House serves on the board of directors of this company.
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8. Global Investment House has received compensation from this company for the provision of
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services from this company in the next three months.
10. Please see special footnote below for other relevant disclosures.
Global Research: Equity Ratings Definitions

Global rating Definition
Buy Fair value of the stock is >10% from the current market price
Hold Fair value of the stock is between +10% and -10% from the current market price
Reduce Fair value of the stock is between -10% and -20% from the current market price
Sell Fair value of the stock is < -20% from the current market price
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Global Research Sector

Saudi Arabia Cement Sector

Global Investment House stock market indices can be accessed

Omar M. El-Quqa, CFA

Faisal Hasan, CFA

Dr. Sandeep Gupta

Saudi Arabian Economic Profile 6

Saudi Arabia Cement Industry 9

Peer Group Comparison 17

Valuation and Recommendation 20

Arabian Cement Company 23

Eastern Province Cement Company 31

Qassim Cement Company 39

Saudi Cement Company 46

Yanbu Cement Company 54

Yamama Saudi Cement Company 62

Southern Province Cement Company 69

Tabuk Cement Company 76

Saudi Arabia Cement Sector

- During 2006, cement production rose to 27.03mt as compared to 26.03mt in 2005.

November 2007 Saudi Arabia Cement Sector 

Table 01: Saudi Arabia Cement Sector - Recommendation Summary

 Saudi Arabia Cement Sector November 2007

Chart 01: Performance of ACC Vs TASI and Cement Index

Cement Index TASI Arabian Cement

Chart 02: Performance of EPCC Vs TASI and Cement Index

Cement Index TASI EPCC

Chart 03: Performance of QCC Vs TASI and Cement Index

Cement Index TASI Qassim

November 2007 Saudi Arabia Cement Sector 

Chart 04: Performance of SCC Vs TASI and Cement Index

Cement Index TASI Saudi Cement

Chart 05: Performance of YCC Vs TASI and Cement Index

Cement Index TASI Yanbu

Chart 06: Performance of YSCC Vs TASI and Cement Index

Cement Index TASI Yamama

 Saudi Arabia Cement Sector November 2007

Chart 07: Performance of SPCC Vs TASI and Cement Index

Cement Index TASI SPCC

Chart 08: Performance of Tabuk Vs TASI and Cement Index

Cement Index TASI Tabuk

November 2007 Saudi Arabia Cement Sector 

Saudi Arabia Economic Profile

Table 02: GDP by Type of Economic Activity

More attention towards human resource development…

 Saudi Arabia Cement Sector November 2007

Surplus despite heavy capital spending…

Building cities to house economic growth…

Privatization at a rapid pace…

November 2007 Saudi Arabia Cement Sector 

to grow to 59,000 MW by the year 2024 requiring an estimated investment of SR430bn

 Saudi Arabia Cement Sector November 2007

Saudi Arabia Cement Industry

Table 03 : Current Capacities, Production & Sale of Cement in Saudi Arabia

Chart 09: Saudi Arabia - Shares in Clinker Production in 9M-2007

November 2007 Saudi Arabia Cement Sector 

Chart 10: Saudi Arabia - Shares in Cement Production in 9M-2007

Chart 11: Saudi Arabia - Shares in Cement Sales in 9M-2007

10 Saudi Arabia Cement Sector November 2007

Region-wise Market Shares

Table 04: Region-wise Capacities (in ’000 tonnes)

Table 05: Region-wise Growth of Cement Consumption (in ’000 tonnes)

November 2007 Saudi Arabia Cement Sector

Saudi Arabia Cement Sector November 2007

November 2007 Saudi Arabia Cement Sector

Saudi Arabia Cement Sector November 2007

November 2007 Saudi Arabia Cement Sector

Saudi Arabia Cement Sector November 2007

November 2007 Saudi Arabia Cement Sector

Saudi Arabia Cement Sector November 2007

November 2007 Saudi Arabia Cement Sector