Raysut Cement’s preliminary Q3-14 results appear uninspiring at a first glance, a report by NBK stated following Raysut’s announcement of its financial results for the third quarter of 2014.

Raysut had reported a net profit of OMR 20.873 million compared to OMR 19.210 million during the same period in 2013, registering a profit growth by around 8.6%.

At this point in time, only the consolidated income statement is available, with no balance sheet or cash flow statement and also no distinction between the parent company and the UAE subsidiary Pioneer, NBK highlighted, adding that Raysut’s topline growth remains low as revenues for the group amounted to OMR 21.3 million, up 3% YoY but 6% below NBK’s forecast of OMR 22.6 million.

“We were expecting revenue growth to accelerate on rising demand in the UAE market and a gradual improvement in the over-supply situation in the Omani market,” NBK stated, adding that profitability improves YoY but comes in weaker than expected.

Raysut reported a gross profit of OMR 6.7 million (+16% YoY), with a gross profit margin of 31.4% (+360 bps YoY). Operating profit excluding other income was OMR 6.2 million (+13% YoY) but 18% below NBK’ forecast of OMR 7.5 million.

Accordingly, operating profit margin improved 260 bps YoY to 29.1%, but came in lower than NBK's forecast of 33.2%, the Company’s report said, noting that net profit stood at OMR 5.3 million, up 18% YoY.

Although the Q3 results show some improvement YoY, they appear weaker than expectations. We do not yet have the breakdown of the results, therefore, we are unable to determine the reasons for the miss in results at this point in time, NBK highlighted, adding that since the stock currently offers a 16% downside compared to our fair value of OMR 1.836, NBK has downgraded its recommendation on Raysut Cement from Hold to Sell.