Surging cement inflows from neighbouring United Arab Emirates are fuelling fierce competition among local manufacturers for market share, according to the Sultanate’s largest cement maker.
Raysut Cement says it is responding to these challenges by shipping volumes overseas, as well as boosting sales in domestic markets.
“While there are positive vibes for development and growth in the construction industry across the GCC countries including Oman, the supply base of cement is currently overtaking demand in the UAE. This is leading to a large volume of supplies coming from the UAE to Oman, creating undue competition in the local market,” said Shaikh Ahmed bin Alawi al Ibrahim, Chairman of the Board of Directors, Raysut Cement Group.
“Given this background, the Company has met with the challenges effectively by holding on to its sales and enlarging the profit for the group as a whole by optimising sales in varied markets,” he added in the Chairman’s report of the Group’s performance for the half year ended June 30, 2014.
The Group posted a pretax profit of RO 17.48 million for the first six months of 2014, compared with RO 16.38 million earned during the corresponding period of last year, entailing an increase of about 6.7 per cent. Pre-tax earnings by the parent company stood at RO 15.17 million, against RO 13.89 million in 2013. Profit earned by subsidiaries like Pioneer Cement stood at RO 2.85 million (against RO 2.42 million in 2013), Revenue earned by the group for the first six months of 2014 totalled RO 49.50 million (net of inter-company transactions of RO 2.21 million) against RO 49.52 million (net of inter-company transaction of RO 2.34 million) in the corresponding period of 2013.
Sales revenue generated by the parent company out of its Salalah operations totalled RO 35.61 million during the period ended June 30, 2014, against RO 36.33 million achieved during the corresponding period of last year. “In spite of competition in the northern markets and volatility in the export markets, the parent company could largely match the revenue of the previous period, albeit with a 2 per cent decline,” he said.
Pioneer Cement generated revenues of RO 14.54 million during the first half of 2014, against RO 14.19 million earned during the corresponding period of last year, an increase of 2.5 per cent.
According to the Chairman, severe competition from UAE suppliers impacted sales in the northern market, but the company managed to sell the shortfall in the southern market as well as in export segments. The Yemen and African markets provided opportunities for larger volumes during the period, he noted.
In all, the group produced 1,663,600 tons of Clinker and 1,971,737 tons of Cement during the first half of this year, against 1,676,399 tons of Clinker and 1,955,121 tons of Cement produced during the same period last year.
Pioneer Cement in the UAE produced 590,996 tons of clinker and 720,738 tons of cement this year, against 589,124 tons of clinker and 692,379 tons of cement produced last year. “Pioneer also has faced severe competition in the UAE market due to a surge in supplies relative to demand. Consequently Pioneer explored supplies in the North Oman market to keep its higher volume sales,” said Al Ibrahim.
Meanwhile, the company is pursuing a number of initiatives to augment its capabilities and overall performance, according to the Chairman. Projects in hand include the installation of a distribution terminal in Duqm, additional silo capacity at the Salalah plant, and installation of an offshore wheel loader system in the north to facilitate bulk cement handling.
“The projects are in various stages of development, and the company will reap benefits from these (ventures) in the early part of next year. The company is also exploring avenues for developing the potential of market beyond Oman,” he added.
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