Yamamah Steel posts Q4 revenue down 31% at $86.8mln

Al Yamamah Steel Industries has reported revenues SR326 million ($86.8 million) during the fourth quarter (Q4) of 2021, marking a year-on-year (y-o-y) decline of 31.3%, said a report.

Al Rajhi Capital, a leading financial services provider in Saudi Arabia, said in its report that the results were lower than its estimate of SR437 million.

“We estimate that lower than expected volume from the construction segment resulted in a lower-than-expected revenue. Despite a fall in revenue, relative to the previous year, gross profit increased by 8.5% y-o-y and was aided by an improvement in gross margins,” said Al Rajhi Capital.

“We expect better inventory management to have aided improvement in profitability. Operating profits on the other hand increased by 36.8% y-o-y, at the back of higher gross profits and lower operating expenses. However, the profitability of Yamamah was lower than expected and was impacted by lower-than-expected revenue. Going forward, we expect average steel prices to fall slightly in FY2022, compared to FY2021.

“We also expect the margins of the company to come under pressure. In FY2021, the company earned an average gross margin of c.22%, which we feel is not sustainable and we expect the same to come under pressure and fall in FY2022.

“While we feel that the profitability is likely to come under pressure for the next two years, we expect the performance to stabilise post this, aided by performance from electricity and pipes. Given this, we reduce our target price to SR46 per share from our earlier target price of SR55 per share but maintain our rating at ‘Neutral’”, it added.