tadawul 2222 and the Role of Hail Cement Company in Saudi Market

The term "tadawul 2222" does not refer to a specific financial symbol in the Saudi financial market; rather, it is often used to denote interest in trading activities on the Saudi Tadawul market. Tadawul (Saudi Exchange) is the only official stock exchange in Saudi Arabia, overseeing the trading of stocks, sukuk, bonds, and investment funds. Established in 2007 as an independent entity, it is now one of the largest regional exchanges in terms of market capitalization and number of listed companies.

The term "2222" may be used informally or numerically to indicate the stock market or trading in general, or it may refer to an internal code or case study. In this report, we focus on Saudi Tadawul through the case study of Hail Cement Company, as an example of a listed company that has undergone significant developments in recent years. This approach provides an opportunity to understand the workings of the Saudi market, regulatory challenges, and how companies deal with economic changes and regulatory actions such as mergers or delistings.

All listed companies are subject to oversight by the Saudi Capital Market Authority, which ensures disclosure, transparency, and protection of investors' rights. Market regulations are continuously updated to keep pace with changes in the business environment, focusing on enhancing the investment appeal of the local market to both domestic and foreign investors. Thus, understanding Saudi Tadawul through the study of companies like Hail Cement provides readers with an accurate perception of how the market operates, along with the opportunities and challenges faced by listed companies.

The Saudi financial market has witnessed significant development since its official inception. Initially, the market was under direct government supervision until the establishment of the Saudi Stock Exchange Company (Tadawul) in 2007 as a closed joint-stock company. The Saudi stock exchange has experienced tremendous growth in terms of the number of listed companies and total market capitalization, becoming the largest securities market in the Arab region.

Tadawul is characterized by the diversity of economic sectors it covers, including oil and gas, banking, telecommunications, tourism, construction, and basic materials such as cement. The "TASI" index is the main market index, reflecting the performance of all stocks listed on the main market. Since the launch of Vision 2030, the infrastructure and building materials sector, including cement, has gained increasing importance to support major national development projects.

Tadawul is subject to a set of strict regulations governing listing, trading, and disclosure operations, requiring companies to periodically disclose their financial results and any significant changes. Transparency and investor protection are priorities for the authority, as it seeks to enhance the confidence of market participants. The opening of the market to foreign investors has also provided additional opportunities to attract capital and stimulate competition among national companies. All these factors have contributed to making Saudi Tadawul a dynamic environment characterized by diversity and relative stability.

Hail Cement Company is one of the companies in the building materials sector in Saudi Arabia, focusing its operations on the production and marketing of various types of cement. The company was established to meet the growing demand for cement in the Hail region and surrounding areas, especially with urban expansion and developmental projects under Vision 2030.

The company emerged from the merger of two local companies, Hail Cement and Hafr Al-Batin Cement, allowing it to build a strong production base in the northwest of the Kingdom. The company owns several modern factories that rely on advanced production technologies, covering the needs of infrastructure projects, housing, and general contracting.

The company was listed on the Saudi financial market (Tadawul) under the symbol 3001 (/stocks/3001/) within the building materials sector, and its stock experienced notable trading, especially during periods of increased demand for cement. Hail Cement was one of the prominent regional players in the Saudi market before entering a phase of acquisition and merger with Qassim Cement Company. The company is characterized by a flexible production policy and the ability to adapt to demand fluctuations, while also adhering to the disclosure and governance requirements imposed by the Saudi Capital Market Authority.

Hail Cement Company's financial performance has experienced notable fluctuations during 2023 and 2024. In 2023, the company recorded a net profit of SAR 24.6 million, having returned to profitability after incurring losses in some previous quarters. This improvement is attributed to the company's efforts to reduce costs and enhance operational efficiency, along with benefiting from increasing government projects under Vision 2030.

In the first quarter of 2024, the company announced a net profit of SAR 15 million; however, this figure represents a 19% decrease compared to the same period in the previous year. This decline is attributed to rising input costs and some operational challenges, despite a relative improvement in demand for the company's products.

Regarding dividends, the company announced in February 2024 a cash distribution of 3.5% of capital for the fourth quarter of 2023. This was the last announced cash distribution before trading was suspended and acquisition procedures began. These results reflect that Hail Cement was in a transitional phase, balancing the pursuit of sustainable profits with adapting to structural changes in the sector.

Before the announcement of trading suspension in June 2024, Hail Cement's stock was trading in the range of tens of riyals, with daily fluctuations reflecting the state of the market and sector. There were no fixed figures for the last price due to ongoing changes; however, the company's market capitalization was typically estimated at several hundred million riyals, classifying it among small to medium-sized companies in the Saudi market.

As for the price-to-earnings (P/E) ratio, it was relatively high in the recent trading periods, estimated to range between 20 and 30 times based on the announced earnings and market capitalization before trading suspension. This high ratio reflects limited annual profits compared to the company's size in the market. It is important to note that all these figures are approximate and depend on market data available before trading suspension, as the company has not issued final official figures after the acquisition.

These indicators show that Hail Cement's stock faced challenges in achieving strong and sustainable profit growth, prompting considerations of strategic options such as merger or acquisition to improve efficiency and enhance competitiveness.

Hail Cement Company has maintained a balanced dividend distribution policy that aligns with its financial performance, announcing in February 2024 a cash distribution of 3.5% of capital for the fourth quarter of 2023. This distribution is considered within the average rates for the cement sector in the Saudi market, where distributions for similar companies range between 3% and 5% annually of the nominal or market value of the share.

The company has been keen to announce cash distributions during periods of good profitability to meet shareholder expectations and maintain their confidence. However, distributions were affected by market fluctuations and overall financial performance, as they ceased after the announcement of trading suspension and the commencement of acquisition procedures by Qassim Cement Company.

The company's approach to dividend distribution reflects its commitment to providing an appropriate return to shareholders within the limits of achieved profitability, while considering the need to retain a portion of profits to support expansion and investment in its operations. This policy reflects a balance between achieving immediate returns for investors and ensuring the company's long-term sustainability.

The cement sector in Saudi Arabia is considered one of the essential industrial sectors, serving major infrastructure projects, housing, and urban development. The sector includes several leading companies, including Saudi Cement Company (Eastern), Qassim Cement Company, Yanbu Cement Company, and Hail Cement Company before its merger with Qassim.

Competition in the sector is influenced by various factors, primarily production capacity, proximity of factories to project sites, and transportation costs. Major companies like Qassim and Eastern enjoy significant market shares due to production efficiency and wide geographical distribution, while smaller regional companies focus on meeting local demand in specific areas.

The sector has seen a notable recovery with the beginning of the implementation of Vision 2030 projects, as demand for building materials has increased; however, some periods have faced challenges such as rising energy costs and delays in some government projects. Nevertheless, Saudi cement companies have shown strong aggregate profits in 2024, with ongoing competition for market share and offering competitive prices to contractors and infrastructure projects.

The results of Saudi cement companies in 2024 showed relatively good performance, with aggregate net profits reaching approximately SAR 2 billion during the first nine months of the year, according to published financial reports. However, the second quarter of 2024 witnessed a decline in sector profits by 11% against expectations, due to rising logistical costs and energy prices, in addition to delays in some major construction projects.

The most significant opportunities in the sector lie in the continued allocation of high government budgets for infrastructure and housing projects, ensuring sustained demand for cement and building products. Additionally, the merger of smaller companies with larger ones, such as Qassim's acquisition of Hail, could lead to improved operational efficiency and cost reductions through the unification of operations and supply chains.

Conversely, price competition and shrinking profit margins remain among the main challenges, especially for small and medium-sized companies. Moreover, changes in government policies or project delays may impact overall demand in the sector. Companies in this sector must continue to develop their strategies to address these challenges and achieve sustainable growth.

In June 2024, the Saudi Capital Market Authority announced the suspension of trading in Hail Cement's stock, paving the way for the delisting of the company from the market after the approval of Hail's board of directors on an acquisition offer from Qassim Cement Company. Hail's shareholders approved the deal, which included Qassim purchasing all of Hail's shares, to be merged as a wholly-owned subsidiary within the Qassim Cement Group.

This deal aimed to expand Qassim's operations in the northern regions of the Kingdom and leverage the production capabilities and infrastructure owned by Hail Cement. The acquisition offer included determining a fair price for the share based on its market value before trading suspension, offering Hail's shareholders a cash or share exchange in Qassim according to the terms of the deal.

After the merger was completed, Hail Cement's independent data disappeared from the financial market, with its operational results included in the consolidated reports of the Qassim Group. This step reflects a strategic trend in the Saudi cement sector towards consolidation and increasing operational efficiency to keep pace with market transformations and major development projects.

Following the completion of the acquisition deal in mid-2024, Hail Cement Company became part of the larger Qassim Cement Group. The group is expected to achieve significant benefits from merging operations and unifying production lines, especially in the northern regions of the Kingdom, where Hail had a strong presence.

No independent financial figures for Hail have been released since the merger, as its results are now part of the consolidated data of the group. Operationally, the merger is expected to enhance production efficiency, improve utilization of production capacity, and reduce costs through economies of scale and shared supply chains.

This development reflects the general trend in the Saudi cement sector towards mergers and consolidation to face intense competition and demand fluctuations. Additionally, this step allows the new entity to strengthen its ability to meet the requirements of major government projects under Vision 2030 and achieve sustainable growth in a dynamic and changing market.

The cement sector in Saudi Arabia faces a range of risks and challenges that impact the performance of companies and their ability to achieve profits. Among the most prominent challenges are rising energy and input costs, which constitute a significant portion of production costs. Additionally, intense competition among companies drives price reductions, affecting profit margins, especially for small and medium-sized enterprises.

Companies also face challenges related to demand fluctuations resulting from delays or cancellations of government and private projects, as well as changes in regulatory or economic policies. Furthermore, heavy reliance on the domestic market makes companies vulnerable to fluctuations in the Saudi economy directly.

To address these risks, companies resort to improving operational efficiency, diversifying products, and expanding their customer base. On the market policy front, trends towards mergers and acquisitions provide solutions to enhance competitiveness and reduce costs, as seen in the merger of Hail with Qassim Cement.

The Saudi Capital Market Authority places utmost importance on disclosure and transparency, requiring listed companies to announce their financial results and significant developments periodically. These policies aim to protect investors' rights, enhance confidence in the market, and ensure a stable business environment.

In the case of Hail Cement, the company committed to announcing its financial results and clarifying reasons for performance changes, as well as disclosing the acquisition deal and accompanying regulatory procedures in a timely manner. Transparency played a crucial role in facilitating the acquisition process and reassuring shareholders about the company's future within the Qassim Group.

All listed companies are subject to strict oversight by the Capital Market Authority, which imposes penalties for any violations of disclosure rules. Additionally, Tadawul provides official channels for publishing data and reports, ensuring that information reaches all relevant parties accurately and promptly.

To follow news of listed companies in the Saudi financial market (Tadawul), several reliable sources can be relied upon. The official Tadawul website is the primary source for official announcements and financial reports, where all periodic disclosures and company updates are published.

In addition, specialized news websites such as "Argaam" and "Mubasher" provide comprehensive coverage of company performance and the sector, along with detailed financial analyses and updates on distributions, deals, and regulatory developments. These sites also offer historical databases that allow investors and interested parties to review the financial performance of companies over different time periods.

For Hail Cement Company, it has become essential to follow Qassim Cement Company's reports after the merger, as Hail's results are included in the group's consolidated data. It is always recommended to refer to official and reliable sources before making any financial or investment decisions.