MUSCAT: Raysut Cement Company, which acquired United Arab Emirates' Pioneer Cement this month, yesterday announced a 27.7 per cent fall in net profit at RO20.72 million for last year, hit by dumping from neighbouring UAE producers coupled with slackness in unit price realisation in export markets. This is against RO28.68 million posted in the previous year.
The company's sales revenue also dipped by 27.3 per cent to RO64.98 million from RO89.35 million during the period under review.
"The full year profit is less than our estimate. Dumping of cement by United Arab Emirates producers in northern Oman continued in the fourth quarter. The company was not able to compete with UAE producers," said Kanaga Sunder, senior research analyst of Gulf Baader Capital Markets.
"The bottomline is below our expectations, but the top line is above our estimate. The company must have increased their sales volume in the fourth quarter," he noted.
The overall unit price realisation was under tremendous pressure. There has been a slowdown in export demand, especially in neighbouring Yemen due to pressure from Saudi companies. "Yemen is one of the major export markets for Raysut. Export market price realisation also came down." Raysut Cement has a joint venture in Yemen, which enables the company to become a supplier of cement in southern part of Yemen with terminal facilities in Mukulla and Aden.
Both Raysut Cement and Oman Cement brought down their selling price in the local market, in a move to effectively compete with its rivals selling their products in Sohar and Muscat.
Proximity to Sohar
Proximity to Sohar was one of the big advantages of UAE producers, and they were even meeting the bulk users' demand in Muscat. "Transport cost for UAE cement firms to sell their products in Muscat is only RO3-4 per tonne, while in Sohar, it is around RO2 per tonne. Bulk cement consumers depend on UAE companies."
Raysut Cement shares dipped 3.53 per cent to RO1.174 on the Muscat Securities Market, amid selling pressure of 66,180 shares.
Sunder noted that with the recent acquisition of United Arab Emirates's Pioneer Cement, Raysut will be in a better position to cater to the demand of customers in northern Oman.
"They can easily bring in cement from UAE to northern Oman, which will benefit the company this year," he added.
Total expenditure of the company came down to RO42.36 million in 2010 from RO61.58 million in the previous year.
The recent acquisition of Pioneer Cement Industries for $172 million has added another 1.7 million tonnes, stretchable to 1.8 million tonnes, to the existing capacity of Raysut CementRaysut group making it to about 4.7 million tonnes per annum. The entire amount has been financed by long-term borrowing from the consortium of bankers led by BankDhofar.
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