Net income – OMR0.4, -85% Y-o-Y, N/M Q-o-Q, -81% vs. EFGe
Operating profit – OMR1.21mn, -73% Y-o-Y, N/M Q-o-Q, -58% EFGe
Revenues – OMR21mn, +8% Y-o-Y, +22% Q-o-Q, +17% vs. EFGe
 
Raysut Cement Company (RCC) reported 1Q18 headline results, with consolidated earnings of OMR0.4mn (-85% Y-o-Y), missing our estimate by a wider margin, driven by weaker-than-estimated margins during the quarter despite stronger-than-estimated revenues. RCC’s consolidated revenues of OMR21mn (+8% Y-o-Y, +22% Q-o-Q) were 17% above our estimate. However, operating margins of 5.8% were significantly below our estimate of 16% and 23% in 1Q17. Management attributed the weaker profits to lower cement prices, receivables provisioning and inflationary impact during the quarter. 
 
As per company announcement, consolidated cement sales volumes have improved significantly to 1mn tonnes (+30% Y-o-Y, +40% Q-o-Q, +35% EFGe). However, the consolidated cement price fell to a record level of OMR21/tonne (-18% Y-o-Y, -13% Q-o-Q, -13% EFGe) and overshadowed the volume growth.
 
A very disappointing set of results by Raysut Cement. We believe the pricing pressures at the company’s home and export markets will continue to challenge over the short term. Nevertheless, weaker-than-expected operations would challenge our current estimates further. We will revisit our estimates once the full financials are released. 

Raysut Cement Co: OMR0.728 as of 15 Apr. 2018, Rating: Neutral, TP: OMR0.840/share, MCap: USD383mn, RCCI OM/RCCI.OM