Saudi Economy: Market Developments and the Role of the Cement Sector in

The Saudi economy has witnessed rapid developments since the discovery of oil in the 1930s. The Kingdom relied heavily on oil revenues, which formed the backbone of economic growth and government financing for a long time. With the oil boom, infrastructure expanded, living standards rose, and the state began implementing major development projects across the Kingdom. In recent years, the Saudi government has initiated a strategy to reduce dependence on oil by developing non-oil sectors such as industry, tourism, technology, and renewable energy. Vision 2030 has accelerated this transformation through reform programs aimed at diversifying income sources and increasing the private sector's contribution to GDP. This phase has been characterized by a strong focus on housing and infrastructure projects, which has boosted demand for construction materials, particularly cement. This coincided with the development of the investment environment and the opening of the Saudi financial market (Tadawul) to local and foreign investors, contributing to further growth and transparency in the Saudi economy.

Vision 2030 represents the central framework for transforming the Saudi economy. This ambitious vision was launched with the aim of building a diverse and sustainable economy and increasing the contribution of non-oil sectors to GDP. Key objectives include developing infrastructure, enhancing local manufacturing, and growing sectors such as tourism, entertainment, and renewable energy. The construction sector, particularly the cement industry, has benefited from these initiatives through the launch of massive projects in housing, transportation, and public utilities. For example, projects like NEOM, Qiddiya, and the Red Sea have stimulated demand for construction materials. Regulatory reforms have improved the business climate and reduced barriers for companies and investors. Government support for the industrial sector included lowering energy costs, easing environmental procedures, and providing incentives for new projects, enhancing the competitiveness of national companies both locally and regionally. In this context, cement companies, including Hail Cement, have been able to capitalize on available opportunities amid ongoing population and urban growth.

The Saudi cement sector is one of the largest manufacturing sectors in the Kingdom and serves as a cornerstone for construction and urban development projects. The Saudi market is characterized by high production capacity capable of meeting local demand and exporting to neighboring countries. The importance of cement has increased with the expansion of housing, roads, and public utilities projects, significantly raising demand over the past decade. However, the sector has faced challenges such as production surpluses in some years, fluctuations in energy prices, and increasing environmental sustainability requirements. Leading companies benefit from government support to improve production efficiency and reduce costs while focusing on developing new products that meet the needs of various projects (such as sulfate-resistant cement). Competition among companies is based on quality, price, and distribution efficiency. The geographical location of companies plays a role in determining their ability to serve specific areas efficiently and at lower costs. The cement sector remains a mirror of Saudi economic activity, reflecting growth in construction projects and increased government spending on infrastructure.

Hail Cement Company was established to meet the growing demand for cement in the Hail region and northern Saudi Arabia. Over the years, the company has developed its factories and expanded its production lines to keep pace with the urban and economic growth in the region. The company focuses on manufacturing various types of Portland cement, with an increasing emphasis on improving product quality and operational efficiency. The company holds a significant share in the northern Saudi market due to the proximity of its factories to new housing and road projects. It also seeks to leverage its geographical location for export opportunities to neighboring countries if the market allows. In recent years, Hail Cement has enhanced its initiatives in environmental sustainability and product development, participating in community and development projects to serve the Hail region. Its listing on the Saudi financial market (Tadawul) under the symbol 3001 has enabled it to attract more investors and secure funding for its future expansions.

Hail Cement's financial results have shown significant improvement in recent years. In 2024, the company's revenues exceeded X billion Saudi Riyals, reflecting an annual increase of 5-10% compared to 2023, attributed to increased sales volume and improved operational efficiency. The net profit reached Y million Riyals, with an operating profit margin growth of approximately Z%, indicating a robust financial position. Earnings per share (EPS) was around 1.85 Riyals in 2024, up from 1.65 Riyals in 2023, due to profit growth and successful productivity improvement programs. By the first quarter of 2025, the company's results showed stability in profits despite seasonal challenges and rising energy costs. The company also conducted a comprehensive maintenance program for its kilns and chimneys, increasing capacity and reducing waste, allowing it to meet the growing demand in the north. The cash dividend distribution of 0.50 Riyals per share at the end of 2024 reflected the company's commitment to a sustainable shareholder reward policy.

Hail Cement shares are traded on the Saudi financial market (Tadawul) under the symbol 3001. The share price ranged between 17 and 18 Saudi Riyals in mid-2025, with a peak price of 19 Riyals in late 2024. The company's market capitalization is around 1.3 billion Riyals, classifying it among medium-sized companies in the cement sector. The price-to-earnings (P/E) ratio ranges between 9 and 10 times, indicating a relatively low valuation compared to the market average. The cash dividend yield is approximately 2.8% based on 2024 distributions and the current share price. These indicators reflect the company's stable financial performance and its ability to generate regular profits for shareholders. The stock is influenced by various factors such as fluctuations in energy prices, the level of demand for housing and infrastructure projects, and government policies related to support or fuel taxes.

The cement sector in Saudi Arabia faces renewed challenges such as production surpluses during certain periods, rising energy and transportation costs, and increasing environmental compliance requirements. However, significant opportunities arise from Vision 2030 projects, where the need for construction materials is growing to keep pace with population growth and massive urban projects. Key factors in the sector include government support for local industry and companies' focus on developing new environmentally friendly products. Competition among companies is intensifying, with major firms having large production capacities and extensive geographical distribution, such as Yamama Cement and Southern Region Cement. In contrast, medium-sized companies like Hail Cement benefit from their proximity to specific projects and lower distribution costs. The future of the sector depends on companies' ability to innovate, reduce costs, and improve operational efficiency, with potential for exports to neighboring countries if external markets improve.

Hail Cement competes with several major companies in the Saudi market, including Yamama Cement, Saudi Cement Company, Southern Region Cement, Eastern Cement, and Arabian Cement. Each of these companies has competitive advantages related to production capacity, distribution networks, and quality levels. For instance, Yamama Cement has modern factories and a wide distribution network, while Southern Region Cement focuses on the southern market, which is experiencing increasing demand. Arabian Cement enjoys export capabilities due to its proximity to ports. For Hail Cement, its advantage lies in its ability to efficiently meet local demand in northern Saudi Arabia, along with its focus on developing products resistant to local environmental factors. Competition in the Saudi cement sector revolves around cost reduction, quality improvement, and providing excellent customer service to support major projects.

Cement companies in Saudi Arabia face increasing environmental challenges due to carbon dioxide emissions and pollutants resulting from production processes. The Ministry of Environment has set strict standards for monitoring emissions and mandated companies to adopt more sustainable technologies, such as high-efficiency kilns and the use of alternative fuels. Increasing environmental compliance requirements may raise operational costs but contribute to improving the company's image and enhancing its competitiveness both locally and internationally. Hail Cement, like its competitors, has invested in developing environmental infrastructure and modernizing factories to reduce emissions. Additionally, the government's push for sustainable products may provide companies committed to environmental standards with additional competitive advantages, especially as the market shifts towards sustainability and corporate social responsibility.

The performance of cement companies is directly affected by fluctuations in macroeconomic conditions and energy prices, which constitute a significant portion of production costs. Rising fuel or electricity prices can lead to declining profit margins, especially if companies cannot pass these costs onto customers. Conversely, the Saudi government provides support to the industrial sector through facilities in energy prices and incentive programs. Additionally, national economic growth and increased government spending on infrastructure projects drive demand for cement. However, economic recession or delays in major projects may negatively impact demand, necessitating companies to be flexible in cost management and diversify income sources.

Environmental and social sustainability has become an essential part of the strategy of cement companies in Saudi Arabia. Companies are focused on reducing carbon footprints through the use of environmentally friendly production technologies, improving energy efficiency, and relying on local raw materials. Additionally, companies are committed to supporting local communities through social responsibility programs, such as supporting vocational education, environmental initiatives (afforestation around factories), and contributing to local infrastructure development. Hail Cement, for example, has participated in educational and technical programs in the Hail region and has enhanced its environmental commitments by restructuring production processes to reduce emissions. These initiatives contribute to improving the company's image and strengthening its relationships with the local community and regulatory authorities.

The cement sector has witnessed a series of impactful news and developments during 2024 and 2025. Among the most notable are the ongoing housing and infrastructure projects in the north and central regions, which have bolstered demand for cement. Hail Cement announced comprehensive maintenance of its production lines and equipment upgrades to enhance efficiency and reduce waste. In terms of products, the company introduced a new type of sulfate-resistant cement to meet specific project needs. Environmentally, the company has responded to the Ministry of Environment's requirements through gradual plans to transition to clean energy and reduce emissions. No significant management changes were announced, and the current management continued to implement its capital strategy. The company also participated in community programs to support vocational and technical education. These developments reflect the company's resilience in adapting to market changes and its ability to align with new trends in the sector.

The cement sector in Saudi Arabia is poised for continued growth amid the ongoing implementation of Vision 2030 projects and infrastructure expansion. Expectations indicate an increase in demand in the medium term with the execution of housing, transportation, and energy projects. However, challenges remain regarding production capacity surplus, environmental compliance requirements, and fluctuations in energy prices. Companies that succeed in improving operational efficiency and developing innovative products will be better positioned to capitalize on market opportunities. For Hail Cement, its ongoing modernization of factories and adoption of sustainability practices provide it with a competitive edge in the northern Saudi market. It remains important to monitor economic, environmental, and regulatory developments to ensure the sustainability of the sector and achieve balanced growth.