Najran Cement: Comprehensive Financial and Competitive Analysis in the Saudi

Najran Cement Company (Tadawul symbol: 3002) was established in response to the accelerated urban growth witnessed in the southern regions of Saudi Arabia over the past two decades. The company's headquarters is located in Najran, where its plants were built near raw material sources to reduce transportation costs and enhance operational efficiency. Since its listing on the Saudi financial market, the company has developed into a cornerstone of the cement industry in the Kingdom, meeting the needs of housing projects, infrastructure, and government and private facilities. The company primarily relies on the production of Portland cement in its various types, targeting the local market with the potential for export to neighboring countries when surplus is available. This is reflected in the company's strategy that focuses on quality and sustainability to ensure continued competitiveness in a constantly changing market.

The Saudi cement sector is considered one of the main pillars of the national economy, due to its role in supporting housing projects, infrastructure, and the construction sector in general. The sector includes dozens of listed and unlisted companies, the most prominent of which are Najran Cement, Yamama Cement, Hail Cement (symbol 3001), and Qassim Cement, among others. In recent years, the sector has faced several challenges, the most significant of which are increased production capacity, a slowdown in government and private real estate projects, and rising energy costs. These combined factors have led to pressure on profit margins and fluctuations in company profitability, with sector profits collectively declining by 25% during the first nine months of 2025. However, the sector still holds strategic importance, especially in light of the Kingdom's plans for massive projects such as NEOM, the Red Sea, and national housing programs, which are expected to raise demand for cement products in the future.

Najran Cement's financial results during 2024 and 2025 showed notable fluctuations. At the end of 2024, the company reported a net profit of SAR 68.4 million, an increase of approximately 24% compared to 2023, driven by improved sales volumes and partial stability in selling prices. However, 2025 brought greater challenges, as the company's profits for the first nine months declined to SAR 24.8 million, a decrease of 33% from the same period of the previous year. The profit for the third quarter of 2025 was only SAR 3.1 million, the lowest quarterly level in six years, primarily attributed to declining operating margins and rising costs, especially energy. These results demonstrate the company's sensitivity to general market conditions and highlight the importance of effective management and cost control in a competitive environment with increasing external pressures.

Analyzing Najran Cement's quarterly results for 2024 and 2025 reveals that performance was volatile. In the first quarter of 2025, the company achieved profits of SAR 17.2 million (a decrease of 4% from the same period in 2024), while profits in the second quarter rose to SAR 4.5 million (an increase of 8% from the second quarter of the previous year). However, the third quarter saw a sharp decline to SAR 3.1 million (a decrease of 79%). This volatility reflects the company's sensitivity to changes in demand, costs, and competition. Regarding cash distributions, the company did not announce regular distributions during this period but focused on share buybacks as an option to support share value and enhance shareholder confidence, a common trend in the face of fluctuating profitability and the need for greater financial flexibility.

Najran Cement's stock (3002) is considered to have medium liquidity in the Saudi financial market, with its last closing price in November 2025 at approximately SAR 6.65, and the company's market capitalization estimated at around SAR 1.130 billion. The approximate price-to-earnings (P/E) ratio is 16.5 based on 2024 earnings, placing the stock in the medium valuation range compared to other companies in the sector. The price-to-book (P/B) ratio ranged between 1.0 and 1.2, while the earnings per share (EPS) was approximately SAR 0.40 in 2024. Notably, the company has not distributed cash dividends in recent years; instead, it has implemented a share buyback program. These indicators provide a clear picture of the stock's position in the market and the company's financial management trends.

Najran Cement competes with several strong companies such as Yamama Cement, Qassim Cement, Hail Cement (3001), and Al-Jouf Cement. Competition often focuses on prices, quality, and regional market shares. Najran Cement primarily serves the southern region, while other companies cover the central, northern, and eastern areas. With increased local production capacity and a relative decline in demand, competition has intensified, affecting profit margins for all companies. The importance of effective management and quick responses to market changes is highlighted in enhancing the company's competitive position and maintaining financial performance stability.

Najran Cement, like other cement companies in the Kingdom, faces several challenges, including rising energy costs, fluctuations in raw material prices, declining local demand for cement, and delays in some government projects. These factors directly impact profit margins and lead to fluctuations in quarterly profits. Additionally, intense competition requires the development of production lines and a shift towards more efficient technologies to reduce costs and increase operational flexibility. Another challenge is managing liquidity in the absence of regular cash distributions, which has led the company to adopt share buyback programs to enhance investor confidence and support the stock price in the market.

In 2025, Najran Cement witnessed significant management changes, with the resignation of the former CEO and the appointment of Engineer Atta Bakr as acting CEO in September 2025. Additionally, a board member resigned in October of the same year. These changes emphasize the company's commitment to enhancing management efficiency and responding quickly to market challenges. Furthermore, the company relies on a governance structure that ensures transparency and regular disclosure of key decisions, which enhances investor confidence and aligns with the requirements of the Saudi Capital Market Authority.

In recent years, Najran Cement has followed a share buyback policy as a tool to support the stock price and increase shareholder confidence in the absence of regular cash distributions. In June 2025, the company announced the completion of the first phase of its self-share buyback program by purchasing 250,000 shares at a cost of SAR 1.41 million. This type of program reflects management's direction towards enhancing the stock's market value and achieving a balance between maintaining liquidity and investing in shareholder interests. Companies often resort to this step when stock prices are below their fair value or when they wish to send a positive message to the market about their strong financial position.

Najran Cement focuses on developing its infrastructure and improving operational efficiency. In July 2025, the company signed an agreement to establish a private electricity transmission station for its plant, aiming to reduce energy costs and ensure supply stability. It also obtained an extension of a long-term loan in August 2025, providing the company with greater financial flexibility to meet short-term obligations and support development strategies. These steps reflect the company's strategic direction towards investing in technology and infrastructure to ensure sustainable production and the ability to meet the demands of local and neighboring markets with the highest levels of efficiency.

Despite the challenges facing the Saudi cement sector, there are positive indicators in the medium and long term. Major government projects such as NEOM, the Red Sea, and Qiddiya, along with the Kingdom hosting global exhibitions and events like Expo 2030, are expected to raise demand for cement and invigorate the entire sector. However, companies must continue to face challenges such as rising costs, intense competition, and cyclical demand fluctuations. Najran Cement, through its investments in infrastructure and operational efficiency, appears well-positioned to benefit from any future recovery, while continuing to improve financial and managerial performance.

Najran Cement focuses its strategy on improving production efficiency, reducing costs, and developing projects that support energy self-sufficiency. The company has not announced major expansion plans for 2025 but is closely monitoring market demand developments and preparing to seize any opportunities arising from government or private sector projects. The company remains committed to high-quality standards and sustainable operations, seeking to enhance its market share in the south with the potential for future exports to neighboring countries. It also focuses on developing human capital and digital transformation as part of its development programs.

From a neutral educational perspective, Najran Cement's stock represents a medium-risk option in a stable core sector. Key opportunities include the presence of major government projects that may increase demand, the stock's valuation at medium levels (P/E ~16.5), and share buyback programs that may enhance market value. Risks include demand fluctuations, the absence of regular cash distributions, and the impact of rising costs on profit margins. Additionally, intense competition in the sector requires effective strategies to maintain market share. It is important for those considering the stock to monitor the company's quarterly results and future plans, emphasizing the need to consult a licensed financial advisor before making any investment decisions.