On the back of growing number of infrastructure and construction activities in Oman, the cement manufacturing companies are set for steady growth in the coming quarters. The growth in construction segment has led to higher off-take of cement, which on the other hand, has helped the sector majors to register double digit growth in their revenues in the second half of 2012.
Till recently, the Omani cement manufacturers were victims of cheap inflow of cement from UAE. In 2011, imports met 25 per cent of cement demand in Oman, mainly from UAE where weak construction sector resulted in excess supply of cement. The UAE companies recently increased their cement prices. Oman’s construction sector is on a positive progression with the industry value expected to grow to a level of over $5 billion from under $4 billion in next 3 to 4 years at an average growth rate of about 6 per cent.
“In the Sultanate, prices are slowly moving up in cement industry, and demand also is on the rise in the region. While these are good news but the supplies in Oman are still under significant pressure making the domestic scenario highly competitive”, according to Ahmed bin Alawi bin Abdulla Al Ibrahim, Chairman of the Board of Directors, Raysut Cement.
The company reported a pre-tax profit of RO 13.697 million for the first half of the financial year 2012, registering an increase of 54 per cent compared to RO 8.893 million in the same period last year. The profit before tax of the company remained flat on a quarter-on-quarter basis at RO 6.852 million for the second quarter of 2012 as against RO 6.845 million reported for Q1 2012.
At the same time, margins of the company improved substantially year on year basis and remained steady in the second half. Operating profit margin saw an increase of 30.8 per cent for the first half of 2012 from 25.3 per cent in H1’11 and pre-tax profit margin improved to 27.6 per cent for H1’12 from 20.5 per cent recorded a year ago. Increase in sales volumes and better price realizations have resulted in higher margins for the Company.
“The increase in profit is attributable to higher sales volume and better price realisation through market optimisation on the face of severe competitions faced by the company both in the domestic and in the export markets compared with that in the previous year. The increase in the market value of investment has some impact in the net profit”, said the Chairman.
According to the management of Oman Cement, the growth trend is expected to continue in the rest of the year.
Oman Cement said in its first half financial report that the pollution control equipment for Kiln 1 is in the final stage of implementation.
The company is likely to go in for purchase or import of clinker in order to bridge any shortfall in the production during the implementation period.
Oman Cement saw its revenue surging up by 18 per cent on year on year basis to RO 14.099 million.
The cost of sales during the second quarter of 2012 had increased substantially by 24 per cent to RO 7.505 million. Higher production had resulted in increased usage of fuel, gas and electricity which increased by 38 per cent year on year basis to RO 2.527 million.
In addition, Oman Cement had imported clinker to an extent of 15,000 metric tonnes to bridge the shortfall due to temporary shutdown.
The company reported a gross profit of RO 6.595 million an increase of 12 per cent on year on year and a decline of 8 per cent on quarter to quarter basis.
Gulf Baader Capital Market research report says: “The gains in the international oil prices have made the government to continue with its aggressive spending towards the infrastructure and construction activities which have spelled boon for the cement sector. With most of construction projects in Oman are in implementation stage, the cement demand in the local market will remain at higher levels”.
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