Cement: A Comprehensive Guide to the Saudi Cement Sector

The Saudi cement sector is classified under construction materials or basic materials in the Saudi financial market (Tadawul), comprising a group of companies that produce essential building materials. Cement is a fundamental material used in constructing concrete blocks, new cities, infrastructure projects, and other vital sectors. The performance of cement companies is directly influenced by the level of government spending on housing and infrastructure projects, in addition to private demand from industrial and commercial sectors. Since the launch of Vision 2030, the sector has experienced a strong boost due to mega projects requiring massive amounts of cement across the Kingdom. The sector is home to established companies with a long history, such as Saudi Cement Company, Yamama Cement, and Eastern Cement, along with regional companies that meet specific regional needs. Factories are strategically distributed to meet demand and facilitate export operations to neighboring countries.

The total production capacity of Saudi cement companies reached approximately 72 million tons annually in 2024, while local demand ranged between 50 to 55 million tons. This production surplus is exported to the Gulf Cooperation Council (GCC) countries and North Africa, allowing companies to diversify revenue sources and mitigate the impact of local saturation. Local demand increased by 3-5% in 2024, driven by the acceleration of housing and infrastructure projects under Vision 2030. Estimates indicate that demand will continue to rise in the coming years, especially with the expansion of residential and industrial projects. Exports also saw significant growth of 15% to countries like Bahrain and the UAE, helping companies maintain good profitability rates amid regional competition.

The price of white cement in Saudi Arabia at the end of 2024 was around 200-220 SAR per ton, while the price of gray cement ranged between 180-200 SAR per ton. Local prices are subject to a value-added tax (15%), and they vary based on the factory's location and the product's type and quality. Conversely, the Kingdom imports limited quantities of high-quality cement from Europe and China to meet specific needs. Globally, cement prices are influenced by energy and transportation costs, as well as competition with regional producers in Egypt and the UAE. Despite stable local prices, international variables compel companies to monitor production efficiency and energy costs to ensure profitability.

The Saudi financial market includes several major cement companies, including Saudi Cement Company (SCC), Yamama Cement, Eastern Cement, Hail Cement, and Qassim Cement. Data from 2024-2025 showed modest revenue growth of 4-6%, with some companies experiencing operating profit increases of up to 10%. For instance, Saudi Cement Company achieved revenues of approximately 1.65 billion SAR and a 9% increase in net profit compared to the previous year. Yamama Cement delivered dividend yields of around 6.5% per share. Most companies adhere to an attractive annual cash distribution policy ranging between 5% and 8% of the share value, making the sector appealing to investors seeking stability and sustainable income.

The demand for cement is directly linked to construction activity, where government and private projects stimulate demand. As construction activities ramp up, cement sales increase, positively impacting company performance. On the other hand, the rise in production capacity has resulted in a surplus directed towards exports, making companies vulnerable to fluctuations in external demand and competitor prices. Despite the abundance of local raw materials (limestone and gypsum), energy costs constitute a significant portion of production costs, requiring companies to enhance consumption efficiency and seek alternative energy sources.

Energy costs (electricity and fuel) are among the biggest challenges facing Saudi cement companies. In recent years, the sector has seen a trend toward gradually increasing energy prices, which has affected profit margins. Despite partial government support, companies are required to improve operational efficiency and adopt clean energy technologies to reduce costs. Local raw materials such as gypsum and limestone are abundantly available, giving companies a competitive edge in cost control. Additionally, companies are working to import coal or gas for some production lines when necessary, making monitoring global energy markets essential for sustaining profitability.

Saudi cement companies are known for their regular cash distribution policy and relatively high yields. The average distribution yield for the sector was between 5% and 8% on the share price in 2024, a rate that exceeds the average yields of other sectors. For example, Yamama Cement distributed 4.6 SAR per share in 2024, while Qassim Cement and Eastern Cement maintained distributions close to 1 SAR per share. The distribution size depends on the company's results and internal policies, but most companies prefer to maintain stable distributions to attract investors seeking steady income.

Data from 2024 indicated that revenues in the Saudi cement sector grew at an annual rate of 4-6%, with operating profits increasing between 8% and 10% for some major companies. This growth is attributed to cost control, increased exports, and improved local demand. Companies like Hail Cement and Saudi Cement demonstrated strong profit growth despite competition. Moderate growth is expected to continue in 2025 with ongoing major residential and industrial projects. However, challenges remain in the face of rising energy costs and fluctuations in export markets, requiring companies to remain flexible in financial and operational planning.

The Saudi cement market is characterized by moderate competition among around 10 major companies that dominate the local market. Companies are geographically distributed to cover all regions, with some focusing on specific areas such as the Eastern or Northern regions. Companies face challenges from regional competitors, especially from Egypt and the UAE, where foreign producers attempt to export cement to Saudi Arabia. However, the quality of local products and transportation costs provide Saudi companies with a competitive advantage. Locally, competition focuses on improving operational efficiency and reducing costs rather than engaging in price wars, as pricing is somewhat monitored by major factories.

Government policies play a crucial role in stabilizing the Saudi cement sector. The state supports housing and infrastructure projects, allocating substantial budgets annually for this purpose. Regulatory bodies such as the Capital Market Authority monitor cement prices, prevent monopolies, and encourage exports when there is a production surplus. The government has launched initiatives to encourage companies to invest in clean technologies and reduce carbon emissions, aligning with Vision 2030's sustainability goals. At the same time, companies are subject to environmental and legislative oversight to ensure compliance with international and local standards.

Vision 2030 projects have significantly stimulated demand for cement. Major projects such as NEOM, the Red Sea Project, Qiddiya, and the expansion of Riyadh require millions of tons of cement during their execution phases. This ongoing demand supports sector stability and provides companies with growth and expansion opportunities. Estimates indicate that demand will continue to grow by about 5-7% annually until 2030, with the potential for increased exports if major regional projects continue. Additionally, government support for infrastructure is a fundamental pillar for the performance of cement companies in the upcoming phase.

The cement industry faces significant environmental challenges related to carbon emissions and energy consumption. Saudi companies have responded to these challenges by investing in environmentally friendly technologies, such as modern filtration systems and the use of alternative fuels. Some companies have launched projects to generate electricity from fuel emissions and improve factory efficiency. These initiatives are not only necessary for compliance with environmental regulations but also enhance the companies' image among international investors and open new export markets. Investments in sustainability technologies are expected to continue in the coming years as global and local environmental standards tighten.

The stock prices of cement companies reflect a mix of factors, primarily: local demand for construction, energy costs, quarterly company results, and the size of cash distributions. Government policies and economic stability also play a role in determining investor confidence. Stock price fluctuations in the cement sector are often less than in sectors like technology or energy, as the sector tends to exhibit relative stability with general market movements. Investors monitor indicators such as beta (which is around 0.8-1 for cement stocks) and price-to-earnings ratios (P/E) ranging from 7 to 11, reflecting moderate valuations compared to other sectors.

The cement sector in Saudi Arabia remains poised for moderate and stable growth in the medium term, supported by ongoing government projects and increasing local demand. However, risks of production surplus and fluctuations in energy prices persist, along with potential demand volatility in export markets. Companies face challenges in improving operational efficiency and meeting environmental sustainability requirements. Additionally, any sudden changes in government policies or delays in executing major projects could impact sector performance. It is essential to monitor local and international developments and leverage modern technologies to ensure continued growth and mitigate risks.