Saudi Budget 2024: Numbers and Implications for Economy and Cement Sector

The Saudi Budget 2024 represents the annual financial plan set by the government, outlining expected revenues, planned expenditures, and anticipated deficits or surpluses. This budget is a pivotal tool for guiding economic policies and determining development priorities across various sectors. The Ministry of Finance is responsible for preparing the budget, which is approved by the Council of Ministers before its official announcement.

The Saudi Budget 2024 significantly impacts the national economy, reflecting the state's direction towards supporting infrastructure projects, renewable energy, housing, and tourism, within the framework of the Kingdom's Vision 2030. The budget also influences investor confidence, as a low deficit or surplus enhances the Kingdom's credit rating, while a high deficit may raise questions about financial sustainability.

Practically, the budget serves as a reference for both the public and private sectors, assisting construction and building materials companies like Hail Cement Company (3001) in planning their future strategies based on the expected government spending on infrastructure and construction projects. These financial policies reflect on the performance of the Saudi stock market, where investors react to budget figures and forecasts, oscillating between optimism and caution depending on spending and revenue trends.

The Saudi Ministry of Finance announced the figures for the Saudi Budget 2024, with total planned expenditures reaching approximately 1,251 billion Saudi Riyals, while revenues are estimated at around 1,172 billion Riyals. Based on these figures, the budget is expected to record a financial deficit of 79 billion Riyals, equivalent to approximately 1.9% of the Gross Domestic Product.

This deficit is relatively low compared to previous forecasts, reflecting the Kingdom's ongoing policy of maintaining a moderate deficit, especially after the surpluses achieved during years of high oil prices. The Ministry of Finance also indicated that the budget continues to fund programs and projects under Saudi Vision 2030, while providing support for vital sectors, all while maintaining financial sustainability in the medium and long term.

It is noteworthy that government revenues heavily rely on oil and gas revenues, in addition to growing non-oil revenues such as fees, indirect taxes, and the tourism sector. The year 2024 witnessed a relative decline in oil prices compared to the previous year, which affected revenue estimates, but did not prevent the Kingdom from continuing to implement its ambitious investment plans.

Oil prices play a pivotal role in determining the revenues of the Saudi Budget 2024, as oil revenues are the primary source of government income. In 2024, global oil prices recorded a decline compared to the previous year, which was reflected in the profits of Saudi Aramco, which announced a net profit of $106.25 billion, a decrease of 12% from 2023. The company's revenues also fell to $436 billion compared to $440.88 billion in 2023.

This decline in Aramco's profits and revenues directly impacts government revenues, making it essential to enhance and diversify non-oil income sources, such as indirect taxes, developing the tourism sector, and increasing foreign investments. Despite the challenges arising from fluctuations in energy prices, the 2024 budget demonstrated the Kingdom's ability to maintain high spending levels while following a strategy to gradually reduce the deficit through the issuance of bonds and sukuk.

These developments underscore the importance of monitoring global energy prices and their role in determining the resilience of the Saudi economy, as well as in shaping support and stimulus policies for affected sectors such as the cement sector, which is closely linked to government-supported infrastructure projects.

The Saudi Budget 2024 reflects the state's commitments to completing programs and initiatives under Saudi Vision 2030, focusing on funding major developmental projects in infrastructure, housing, transportation, renewable energy, and tourism. Among the projects receiving significant support are: NEOM City, the Red Sea Project, Qiddiya, and smart transportation projects.

This massive spending creates vast investment opportunities for the building materials and cement sector, as the demand for local companies' products increases to meet the requirements of government and private projects. These projects also facilitate integration between the public and private sectors and develop national supply chains, benefiting companies like Hail Cement Company (3001) in terms of increased demand and improved profit margins.

Moreover, the focus on major projects contributes to attracting foreign investments, raising employment levels, and achieving economic diversification goals, enhancing the Kingdom's position as a regional and international investment hub.

The Saudi economy maintained moderate growth in the first half of 2024, driven by increased government spending and domestic demand. Estimates from international institutions indicate that GDP growth could reach 3% during the year, reflecting the success of government policies in supporting the economy, despite challenges related to oil price fluctuations.

To finance the deficit resulting from declining oil revenues, the government resorted to issuing international and local bonds, successfully leveraging financial market conditions to attract foreign investments. The Kingdom also expanded its efforts to diversify income sources, focusing on enhancing the tourism and entertainment sector, and expanding the social protection network, within the framework of the expected 2025 budget to be announced at the end of 2024.

On the other hand, population growth and urban development have led to increased demand for housing and facilities, which has reflected in rising household spending and increased local investments. The state continues to secure sufficient funding to implement these programs while ensuring a gradual reduction in the deficit and enhancing financial sustainability.

Hail Cement Company (symbol 3001) is one of the leading companies in the cement sector in Saudi Arabia. The company was established in the Hail region in the northwest of the Kingdom and possesses an integrated production unit for cement and clinker, along with a wide distribution network covering northern and central Saudi Arabia.

The company benefits from its advantageous geographical location and proximity to major development projects such as NEOM and new economic zones, placing it in a strong competitive position to meet the needs of infrastructure and housing projects. The company's results are closely linked to government spending trends, as the demand for cement is an important indicator of economic activity in the construction and building sectors.

Hail Cement aims to enhance its market position by investing in production technology development, improving operational efficiency, and expanding relationships with government and private entities, ensuring it can capitalize on growth opportunities in the local and regional markets.

Hail Cement Company's stock (3001) saw a significant increase in value in mid-2024, driven by rising demand for cement and positive investor expectations for the sector. The company's market capitalization is valued in billions of Riyals, making it one of the largest cement companies in the Kingdom.

The price-to-earnings (P/E) ratio for Hail Cement's stock is at a medium to high level compared to its peers, reflecting strong growth in the company's profits and the future prospects for the sector. The company distributes regular annual dividends, with distribution rates sometimes reaching 40-50% of net profits in profitable years, enhancing the stock's attractiveness for investors seeking stable returns.

It is important to note that the final financial data for the 2024/2025 periods may vary according to market fluctuations, and it is recommended to review the company's periodic reports via the Tadawul platform or through the link: /stocks/3001/.

The cement sector in Saudi Arabia includes several leading companies such as Saudi Cement, Yamama Cement, Northern Cement, and Southern Cement, alongside Hail Cement Company (3001). These companies compete for market share in the local market, with increasing demand resulting from massive government projects under the Vision 2030 plan.

Hail Cement is characterized by high production efficiency and a modern plant, giving it a competitive edge in product quality and cost. Local companies benefit from their geographical proximity to major project sites, reducing transportation costs and speeding up delivery processes.

Despite regional competition from cement production companies in Gulf countries, the Saudi market remains the largest and most stable in the region, with expectations of continued demand growth in the coming years. Challenges remain concerning energy price fluctuations and production costs, along with regulatory changes related to energy efficiency and emissions.

The Saudi Budget 2024 plays a significant role in the performance of the Saudi stock market, as investors await budget figures to understand the expected level of government spending and its sectoral directions. If spending is directed towards infrastructure and construction projects, cement sector companies, such as Hail Cement (3001), benefit from increased demand for their products.

The Saudi financial market experienced a wave of optimism in the first half of 2024 following the budget announcement, with shares of companies linked to the construction and building sector rising. These movements reflect investor confidence in the national economy's ability to achieve growth and the government's continued support for vital sectors.

However, the stock market remains susceptible to fluctuations due to global variables such as oil prices, global monetary policies, and foreign capital movements. Therefore, it is essential to continuously monitor economic and financial developments and not rely on a single trend when making investment decisions.

The Saudi cement sector witnessed several significant developments during 2023 and 2024 that affected the performance of listed companies in the market. Among the most notable developments is the continued launch of massive government projects such as NEOM, the Red Sea Project, Qiddiya, and transportation and metro projects in Riyadh and Jeddah. This has raised expectations for sustained strong demand for cement in the medium term.

Several companies have gradually increased cement selling prices in response to rising demand and energy costs, enhancing profit margins. Companies like Hail Cement achieved record profits in some quarters, reflecting positively on the stock's performance in the financial market.

Regarding partnerships, sector companies announced their desire to collaborate with government and private entities to build new plants and improve the supply chain. Regulatory authorities have also issued new instructions to enhance energy efficiency and reduce emissions in factories, along with reviewing import fees to enhance competitiveness in the local market.

Despite the significant opportunities provided by the Saudi Budget 2024 for the cement sector, there are several challenges and risks to consider. Among the most prominent challenges are fluctuations in energy prices and production costs, as rising fuel or electricity costs directly impact profit margins for cement-producing companies.

New environmental policy shifts also affect production requirements, as companies must invest in environmentally friendly technologies to reduce emissions. Additionally, risks are associated with a slowdown in government spending or a shift in project directions towards the private sector, which may reduce local demand for cement.

Regional and international competition remains an important factor, especially if import tariffs decrease or cement imports from abroad increase. However, local companies remain in a strong position to benefit from geographical proximity and rapid response to national project needs.

Hail Cement Company (3001) is preparing to capitalize on the opportunities arising from the Saudi Budget 2024 and the state's continued focus on supporting housing and major infrastructure projects. The company is expected to continue enhancing its production capacity and developing its operational processes to meet increasing demand.

The company aims to explore new expansion opportunities in the local and regional markets, especially with the upcoming implementation of projects like the Red Sea Project and Qiddiya. It is also planning to establish strategic partnerships with government and private entities to improve the supply chain and benefit from government initiatives supporting national industries.

Despite strong competition from other companies, Hail Cement remains in a favorable position due to its customer base, product quality, and financial management efficiency, enabling it to withstand challenges and achieve sustainable growth.

With market fluctuations and ongoing changes in economic and financial policies, the importance of consulting a licensed financial advisor before making any investment decisions related to the stock market or investing in companies like Hail Cement (3001) is highlighted. A financial advisor helps assess opportunities and risks based on personal financial situations, investment goals, and risk tolerance.

Licensed financial advisors provide neutral analyses based on real data, adhering to regulatory guidelines issued by the Saudi Capital Market Authority. They can also guide investors towards diversifying their portfolios and determining appropriate strategies for different economic conditions.

Therefore, it is always recommended not to rely solely on news or general analyses and to consult a qualified financial specialist to ensure informed and secure investment decisions.