Chronic regional overcapacity and the silent collapse of export revenues have plunged Saudi Cement Company into a brutal price war. Will this push disgruntled investors to liquidate the stock?
The Saudi construction materials sector enters the 2026 financial year facing the same recurring problems.
The region is tackling a colossal order book for infrastructure, real estate, tourism and industry projects. Under the massive impetus of the Vision 2030 plan, real GDP grew by around 4% at an annual rate until the end of 2025, driven by a massive influx of capital and investments. In addition, the active project backlog now exceeds 1.7 trillion US dollars.
Cement, a true real-time barometer of construction activity, sees its demand continue to grow. However, according to official data, the capacity utilization rate is stagnating at around 70%. A determining factor for the 2026 financial year and beyond.
Saudi Cement Company finds itself at the heart of this turmoil. Now one of the largest producers in the country, its success is directly correlated to the construction cycle. But the company can’t afford to raise its prices because each competing factory has excess inventory and is fighting for the same buyers. This is where the problem lies.
Loss of land
Saudi Cement Company has just published results for the first quarter of 2026 which show a contraction in turnover, despite rigorous cost control. Difficult to determine whether management demonstrates good defensive resilience or whether it simply benefits from a luck factor. Revenue fell 8.5% year-on-year to 382.8 million Saudi riyals (SAR) in the last quarter, compared to 418.2 million in Q1 2025.
Profits followed the same downward trajectory. Net profit fell by 7.6% to 100 million SAR in Q1 2026, compared to 108.5 million a year earlier.
Export is the main source of deterioration, with quarterly revenues of 77.6 million SAR, down 26.9% from 106.0 million the previous year. A loss of SAR 28.5 million in export revenue in one year is much more than just a passing anomaly.
Management does not explain or confirm the precise reasons for this slowdown in international activities in its official press release, but in its 2025 annual financial report, it pointed to the drop in average selling prices and the decline in revenues from equity-accounted companies to justify the overall drop in profits.
The company preserves its liquidity while demand (particularly export) weakens. Cash and cash equivalents jumped 67.8% to SAR 73.8 million in Q1 2026 from SAR 44.0 million in FY 2025, providing a significant liquidity cushion.
Abandonment of the market
The market does not seem convinced by this stability scenario. At 33.0 SAR, the stock fell 21.6% over one year and remains well below its 52-week high at 42.4 SAR. This suggests a crumbling of investor expectations.
The valuation reflects this adjustment: the market capitalization of 5.0 billion SAR (1.5 billion USD) induces a multiple of 13.3x forecast profits for 2026, compared to 15x over the last two years. Certainly, the stock is cheaper, but the market is now pricing in slower growth or lasting pressure on revenues.
Analysts show moderate optimism. Three out of five still recommend buying, while two advocate holding. The implied upside potential towards the target of 39.3 SAR (+19.2%) seems attractive on paper. But this gap looks more like hope than a real conviction.
Management has its work cut out for it. When a stock loses more than 20% and trades at lower multiples, the burden of proof now shifts to the company to demonstrate that this is not the start of a prolonged decline.
Cracks in the narrative
The collapse of exports – down 26.9% to 77.6 million SAR – constitutes the main alarm signal. Saudi Cement Company is suffering a hemorrhage of its international sales without official explanation, which suggests either an aggressive price war, an explosion in logistics costs, or even that buyers have found less expensive alternatives.
The ongoing conflict in the Middle East doesn’t help. Regional trade routes are disrupted and construction projects in neighboring markets stall or are shelved altogether.
Domestically, the 2.2% decline signals sluggish construction demand in Saudi Arabia, which is crucial as local sales form the bedrock of the business. The Bahrain unit is already loss-making, and the annual depreciation of SAR 52.1 million means that aging assets will eventually need to be replaced.
Management is hoarding its cash instead of investing, which seems prudent today but could result in falling behind competitors in terms of efficiency or capacity when the markets recover.
