OMAN: Higher gas prices hit profit margins of industries

The rise in gas prices has adversely affected the profit margins of industries in the Sultanate. The first half financial results announced by industries like cement, ceramic tiles, steel and glass manufacturers show that the high gas tariffs have led to higher cost of production leading to profit loss. "Decline in topline growth owing to realisation pressures and cost escalation as a result of natural gas price hike have impacted the profit margins of these companies in the first half", opined Suresh Kumar, Research Head at Al Maha Financial Services.

The two main cement producers, Raysut Cement and Oman Cement , have said that production costs increased dramatically under the new price scheme.

Approved in January this year, the price of natural gas to companies has doubled from a rate of 41 baisas per standard cubic metre (cc) from 20.5 baisas per standard cc, with an inbuilt annual increase of 3 per cent in subsequent years.

The rise, according to analysts, has been part of a response from the authorities to bridge some of the gap in the national budget left by weaker hydrocarbons revenue.

In early March the IMF's country head, Ananthakrishnan Prasad, said that Oman needed to implement reforms to keep its deficit in check, with the scaling back of gas and energy subsidies at the top of the list of priorities.

If adopted, the measures would further impact Omani industries, with those in the rapidly developing petrochemicals sector hit with higher raw materials prices and power dependent producers confronted with steeper electric bills.

Oman Cement 's total expenses rose by 8.2 per cent in the first six months of 2015 compared to the same period of 2014.

"We have continued our efforts to minimise the impact by better cost and selling price management,"Oman Cement said while announcing the first half results. At the same time, production fell by 2.33 per cent at 1,008,779 tonnes of cement in the first half of 2015, from 1,032,898 tonnes for the same period last year, mainly due to limited availability of clinker.

In June 2015, Oman Cement disclosed that due to operational difficulties it had to prolong the shutdown of one of its kilns. The kiln, with 4000t/day clinker production capacity, was closed for planned maintenance, which was to be completed in early June 2015.

Oman Cement warned that the prolonged shutdown of a kiln would have an impact on its second-quarter performance.

The profit before tax for the six-month period dipped by 39.26 per cent to RO 6.02 million for the first half of 2015 from RO 9.92 million for the same period of last year, which also included an amount of RO 2.1 million being income on sale for available-for-sale investments.

Raysut Cement , meanwhile, posted a 33 per cent drop in second-quarter net profit.

The largest cement firm by market value in Oman, the company made RO 4.93 million in the second quarter of the year, compared with RO 7.36 million in the same period of 2014.

The company posted a first-half profit after tax of RO 10.96 million compared to RO 15.59 million a year ago.

Al Maha Ceramics reported total revenue of RO 5,055,949 compared to RO 5,676,778 a year ago.

The company's net profit before tax was RO 1,518,522 compared to RO 1,201,245 a year ago. Net profit after tax stood at RO 1,331,059 compared to RO 1,058,395 a year ago.

Al Maha said earlier, "the change in natural gas price may affect the projected profits of the company in 2015 by approximately 5 per cent. The company plans to mitigate this financial impact by reviewing the pricing across different market segments and implementation of certain cost reduction and efficiency enhancement initiatives".

Al Jazeera Steel Products Company said its earnings results for the six months ended on June 30, 2015 showed a total revenues of RO 41,440,958 compared to RO 49,359,669 a year ago. Net profit after tax was RO 1,437,535 compared to RO 3,461,359 a year ago.

OMAN: Oman Cement profit hit by gas price increase

Doubling of the natural gas price from January this year has substantially pulled down the net profit of Oman Cement Company, the second biggest cement producer in the Sultanate, by 40 per cent to OMR5.44 million for the first half of this year, from OMR9.09 million for the same period of 2014.

On January 1, the Oman government doubled the natural gas price for industries to 41 baisas per standard cubic metre (cc) from 20.5 baisas per standard cc, with an inbuilt annual increase of 3 per cent thereafter.

The impact of the revision affected the net earnings of gas-intensive local industries like cement, ceramic tiles, steel and glass manufacturers, since a sizeable portion of their manufacturing cost is for fuel.

Oman Cement said that the fall in profits was mainly due to the higher energy cost.

“We have, however, continued our efforts to minimise the impact by better cost and selling price management,” said Oman Cement in its first half results.

The profit before tax for the six-month period also dipped by 39.26 per cent to OMR6.02 million for the first half of 2015 from OMR9.92 million for the same period of last year, which also included an amount of OMR2.1 million being income on sale for available-for-sale investments.

The company’s sales revenue was slightly lower at OMR25.53 million for the first half of this year against OMR25.68 million for the same period last year, while total income stood at OMR25.71 million, against OMR26.04 million during the period under review.

New cement mill

Referring to the progress on expansion programme, Oman Cement said its new cement mill of 150 tonnes per hour capacity (with supporting infrastructure of cement silos and bulk dispatches) is expected to be completed in the fourth quarter of 2015.

The company is also taking efforts to reduce emission levels and accordingly awarded a contract for upgrading pollution control equipment for line -2 to FLSmidth with a total value of $11.3 million. The work has already been started and the project is expected to be ready by the second quarter of 2016.

Oman Cement’s production fell by 2.33 per cent at 1,008,779 tonnes of cement in the first half of 2015, from1,032,898 tonnes for the same period last year, mainly due to limited availability of clinker.

“We had targetted higher levels of clinker production during the period. However, due to technical constraints resulting in the prolonged shutdown of our kiln 3 which was under planned maintenance shutdown, our clinker production remained lower than planned. With the efforts of our technical teams, the kiln has now commenced production and we expect better operational performance in future,” said the company.

OMAN: Oman Cement 2014 net profit declines 13% on weaker sales

Oman Cement Co’s net profit for the year 2014 declined by 12.8 per cent to RO13.15mn from RO15.08mn in the previous year. The decline was mainly due to lower volume of cement sales, lower clinker production and higher volumes of imported clinker, the company said in report released on Monday. 

Oman Cement imported higher volumes of clinker to bridge the temporary shortfall due to one of its kilns being closed for capacity enhancement.

The company said it would consider a joint venture (JV) for setting up a new cement plant after detailed studies.

It said the US$39mn project for installing an additional cement mill of 150TPH (tonnes per hour) capacity with supporting infrastructure of cement silos and bulk despatches is in progress and is expected to be completed during the fourth quarter of 2015.

Oman Cement achieved sales of 2,078,937MT of cement during 2014 against 2,101,631MT in the previous year, a decrease of 1.1 per cent. In value terms, total sales dropped 2.05 per cent last year to RO51.35mn from RO52.42mn in 2013.

“Market demand for cement in Oman remains good due to continued emphasis on infrastructure development. With the company's well-structured pricing policy, we hope that in spite of stiff competition with other cement manufacturers, particularly from neighbouring countries, the company will continue to do well to retain its market share,” the report said.The cement producer said that government's decision to double the price of natural gas, effective January 1, is bound to have a major impact on its performance in the coming years. “Similarly restrictions on carrying capacity for road transport of materials will also increase the cost of operations. However, we are committed to meet the challenge by directing our efforts towards better cost management.”

While the demand for cement is expected to remain good, the company will make efforts to increase it market share with the availability of higher quantity of cement after commissioning a new mill, which is expected to commence production during the last quarter of 2015, Oman Cement added.

OMAN: Raysut Cement Q4 Net Rises 9.2%, Misses Forecasts

Oman’s Raysut Cement reported a 9.2 per cent increase in fourth-quarter profit after tax on Thursday that missed analysts’ estimates, according to Reuters calculations.

The company made a profit of OMR6.55 million($17.0 million) in the three months to Dec. 31, up from OMR6.00 million in the prior-year period, Reuters calculated based on the company’s financial statements and Reuters data.

Analysts polled by Reuters had on average forecast Raysut’s quarterly profit would be OMR7.55 million.

The firm made a profit of OMR27.43 million in 2014, versus a profit of OMR27.53 million in 2013, according to a statement to Muscat’s bourse.

OMAN: Cement producers’ cost to increase due to gas price hike in Oman

Two cement producers in Oman — Raysut Cement and Oman Cement — on Sunday said that the hike in natural gas price will jack up their cost of production. 

The gas price has been doubled to 41 baisas per standard cubic metres from 20.5 baisas per standard cubic metre with effect from January 1, 2015 and an annual increase of 3 per cent thereafter.

Oman Cement's costs will increase by OMR2.1 million in 2015 when the government introduces planned hikes to gas prices, the company said.

Oman Cement said the proposed gas price rises will be effective January 1 and will increase every year at rates specified by the Ministry of Oil and Gas, according to a filing to Muscat's bourse.

It would try to minimise the impact of the higher gas prices by improving productivity, restructuring its own pricing and reducing other costs. Raysut Cement's costs will rise by 3 per cent next year due to Oman state plans to introduce higher gas prices from January 1.

Raysut will try offset the impact of higher gas prices by making other cost reductions, improving efficiency and restructuring its own prices, according to a bourse filing.

OMAN: Raysut Cement plans to build a distribution facility in Duqm

Raysut Cement Company (RCC), Oman's biggest cement producer, on Sunday said it is building a distribution terminal in Duqm and additional silo capacity in the Salalah plant.

The company is also building an offshore un-loader and blow pump system in the north to facilitate bulk cement handling. "The work is in progressive stage for some of these projects and the company would reap benefits from these starting from the early part of next year," stated Ahmed bin Alawi bin Abdulla Al Ibrahim, chairman of the company, while announcing the company's third quarter results.

The company also is exploring avenues of spreading its marketing potentials beyond Oman market. 

Raysut Cement Company also said its profit for the first nine months of 2014 rose by eight per cent to OMR23.26 million from OMR21.52 million for the same period last year.

Profit before tax earned by the parent Company in Oman stood at OMR20.25 million, while profit earned by subsidiaries like Pioneer stood at OMRO 3.42 million, Raybulk at OMR0.67 million and Raysea Navigation at OMR0.03 million.

The Raysut Cement group has earned revenue of OMR70.76 million for the period, against OMR70.19 million for the same period last year. 

"While there are positive signs of growth in Oman market, the same is not being translated into cement demand due to sever competitions from the UAE suppliers. The competitions are also experienced in the Yemen and east African markets.

Pressure on volume

UAE is still to engineer significant growth so that the local supplies can be absorbed instead of being offloaded to Oman. So this has caused a considerable pressure on volume and price in the north market for RCC plant," added the chairman. 

The parent company has achieved sales revenue of OMR50.43 million during the period ended September, 2014. "In spite of competitions in the northern markets and volatility in the export markets, the parent company could largely cover the revenue of previous period with a smaller decline of one per cent." 

The group as a whole has sold 2,830,158 tonnes of cement during the period ended on September 30, 2014 against 2,792,256 tonnes of cement sold during the corresponding period of previous year.

The group as a whole has produced 2,461,305 tonnes of clinker and 2813005 tonnes of cement for the first nine months of 2014, against 2,473,426 tonnes of clinker and 2,786,836 tonnes of cement produced during the same period last year.

OMAN: Oman Cement Q3 Net Profit Drops 39.5%

Oman Cement reported a third-quarter net profit that dropped 39.5 per cent from the same period last year, according to Reuters calculations, missing the average forecast of analysts.

One of the sultanate’s largest cement producers made a net profit after tax of OMR2.3 million ($6.0 million) in the three months to Sept. 30, compared with OMR3.8 million in the corresponding period of 2013, Reuters calculated based on financial statements.

Three analysts polled by Reuters had expected the firm on average to make a net profit of OMR4.06 million.

Oman Cement made a net profit of OMR11.4 million in the first nine months of 2014, down from OMR12.4 million in the same period last year, it said in a bourse statement on Tuesday.

OMAN: Cement imports heat up competition

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.

OMAN: Raysut Cement net profit rises to OMR8.23m

Raysut Cement Company, Oman's largest cement firm, said its net profit for the first quarter of 2014 increased to OMR8.23 million from OMR8.17 million posted by the company for the same period of last year. 

However, sales revenue stood lower at OMR24.82 million as compared to OMR25.22 million during the period under review, according to the company's first quarter results posted on MSM website.

Severe price competition

In spite of the severe price competition from the UAE suppliers, and the volatility in the export market, the company has achieved the sales revenue out of its Salalah operation for OMR17.89 million during the period of three months against OMR18.17 million achieved during the corresponding period in the previous year, a fall of 1.5 per cent. The group as a whole has sold 991487 tonnes of cement and 7384 tonnes of clinker during the quarter ended March, 2014 against 1020907 tonnes of cement only in the corresponding period of last year, indicating a decline of two per cent. 

The company has sold 650979 tonnes of cement and 7384 tonnes of clinker in the three month period of current year against 673919 tonnes of cement only in the same period of last year, out of the operations in its Salalah plant. 

In the first quarter of current year, Pioneer Cement has sold 355045 tonnes of cement against 369800 tonnes in the same period of last year, a decrease of four per cent. There was no sale of clinker during the current and previous year in Pioneer. 

Construction segment

The construction segment in the GCC is taking its positive vibration further with much larger outlays being planned in near future. In the first quarter itself the contracts worth $40 billion have been awarded across Gulf Cooperation Council (GCC) countries and it is likely to touch $150 billion by the year end.

Iraq is on a significant developmental spree with a possible award of contract valuing $20 billion during the year, GCC might benefit from it apart from various major projects slated for unveiling within GCC itself. So there are significant opportunities going forward in 2014 as well as in later periods. 

The actual developments in UAE till now are still to absorb the local capacity reasonably, leading to a severe pressure on demands and prices in Oman market during the quarter, which has impact on domestic sales. However the Yemen market has shown signs of improvements. The company's strategy to expand its market base to Yemen, East Africa and to other countries has helped through rise in export, particularly in Yemen market. In this competitive environment Company's focus on its internal efficiencies has given benefits to its advantages. 

The group as a whole has produced 857533 tonnes of clinker and 982384 tonnes of cement during the period ended March, 2014 against 790830 tonnes of clinker and 991858 tonnes of cement in the same period of previous year. The overall production clinker went up by 8 per cent and that for cement went down by 1 per cent, respectively. 

During the period, 545102 tonnes of clinker was produced in Salalah plant of RCC, against 538639 tonnes produced in the same period of previous year, an increase of 1 per cent. 

The company produced 629428 tonnes of cement in its Salalah plant during three months, against 629342 tonnes produced during the corresponding period in the previous year, with a marginal increase in production volume. 

During the period, the sales revenue, earned by Pioneer Cement amounted to OMR7.16 million compared with OMR7.49 million achieved in the same period of previous year. 

Pioneer Cement has earned a profit of OMR1.54 million as against OMR1.15 million earned in the same period of previous year, in spite of the severe competitions faced by the company in the UAE and Oman markets.

OMAN: Cement tenders sizeable capacity expansion

Oman Cement has decided to increase its cement grinding capacity by installing an additional cement mill capable of processing 150 tonnes of material an hour in response to rising sales and profits.

Chairman Dr Abdullah Abbas Ahmed told the Times of Oman that the tender process has already been initiated for the building of the plant.

Oman Cement is also planning to improve its pollution control equipment to control dust emission levels and is in the process of identifying a consultant for this project.

In the first nine months of 2012, Oman Cement saw its net profit increase by 32.5% to $33.4m, up from $25.2m for the same period last year. Sales revenue increased by $14.3m, or 290,000 tonnes.

OMAN: Oman Cement to expand its milling capacity

Oman Cement Company is boosting its cement grinding capacity with the planned installation of a new cement mill with a capacity of 150 tons per hour (tph).

A tender to this effect has been floated by the company, Dr Abdullah Abbas Ahmed, Chairman of the Board of Directors, said a report of Oman Cement’s financial performance for the nine months ended September 30, 2012. The capacity expansion is the latest in a series of measures undertaken by the company in line with soaring cement demand, he added.

Meanwhile, profit after tax jumped 32.5 per cent to RO 12.859 million for the period under review, against net earnings of RO 9.703 million during the same period last year. Total cement sales climbed 20.8 per cent to 1.689 million metric tons this year, from 1.398 million MT last year. In value terms, the turnover rose 15.16 per cent to RO 41.762 million this year, from RO 36.265 million last year.

Clinker production also sharply increased to 1.505 million MT this year, from 1.037 million MT last year. In addition, the company had to import 54,652 MT of clinker to bridge a temporary shortfall stemming from the prolonged shutdown of one of its kilns which was being fitted out with pollution control equipment. In contrast, clinker imports were high as 291,498 MT during the corresponding period of last year.

Cement production was 19.6 per cent higher at 1.677 million MT this year, from 1.402 million MT during the corresponding period of last year. The company also imported 752 MT of cement to cover a temporary shortfall in supply.

Commenting on the outlook for cement demand, the Chairman said: “The underlying fundamentals for the Omani cement market continue to remain strong. This has been demonstrated by the positive growth in sales volumes in the first nine months of the year. The company is positive about the sector demand and it is felt that while competition from neighbouring countries and locally will still continue to exert pressure on margins, the company is well-positioned to retain and improve its market share in Oman.”

The Report further added: “The company’s new clinker production line has provided the much needed support to meet the expected demand in the Sultanate. Additionally, with the enhanced level of government spending along with key project implementation during the remaining period of the existing 5-year plan, the company expects further improvement in demand for cement in the Sultanate.”

OMAN: Oman’s cement companies continue steady growth

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”.

OMAN: Raysut Cement profit shows quantum jump

Muscat: Raysut Cement Company, the Sultanate's biggest cement producer, said the profit before tax for the group soared by 54.1 per cent to RO13.7 million for the first half of 2012, against RO8.89 million for the same period last year. 

The group revenue also showed a robust growth at RO49.55 million from RO43.45 million in the same period of the previous year.

In spite of the severe price competition from the UAE suppliers, and the volatility in the export market, the company has achieved the sales revenue of RO33.86 million during the six months against RO29.97 million achieved during the corresponding period in the previous year, an increase of 13 per cent. 

Profit before tax of the company stood at RO10.51 million for the six month period, as against RO7.59 million earned during the corresponding period last year, an increase of 38 per cent, stated the company chairman Ahmed bin Alawi bin Abdulla Al Ibrahim. 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. However, the increase in the market value of investment has some impact in the net profit.

During the period, the sales revenue net of inter-company adjustments, earned by Pioneer Cement amounts to RO15.69 million compared to RO13.48 million achieved in the same period in the previous year.

Pioneer Cement profit

Pioneer Cement has earned a profit of RO2.93 million as against RO1.20 million in the same period of previous year, in spite of the severe competitions faced by the company in the UAE and Oman markets. 

Raysea Navigation and Raybulk Corporation, two of our subsidiaries that provide with shipping services, have earned profits of RO0.09 million and RO0.17 million during the period of six months ending on June 30.

Construction industry is expected to pick up its growth now in the region. A number of formerly suspended programmes have been recalled in UAE leading to higher growth in 2012 and 2013. Oman's construction industry is on positive progression with the industry value expected to grow to a level of over $5 billion from under $4 billion in next three to four years at an average growth rate of about 6 per cent.

"Keeping in pace with the growth in construction segment, prices are slowly moving up in cement industry, and the demand also is on the rise in the region. While these are good news but the supplies in Oman are still under significant pressure from the inflows from UAE making the domestic scenario highly competitive,- said the chairman. However the Yemen and East African Markets with rise in demand have favourable impacts on the company. 

The group as a whole has produced 1,756,724 tonnes of clinker and 2,026,863 tonnes of cement during the period ended on June 30, 2012 against 1,709,305 tonnes of clinker and 1,619,245 tonnes of cement in the same period of previous year.

During the period of six months, 1,067,702 tonnes of clinker was produced in Salalah Plant of RCC, against 1,090,630 tonnes produced in the same period lsat year, a fall of 2.1 per cent.

The company produced 1,252,514 tonnes of cement in its Salalah plant, against 997,286 tonnes produced during the corresponding period in the previous year, an increase of 25.6 per cent. 

The production of cement has increased substantially.

by 25.2% for the group in order to meet the needs of additional demands for cement in both domestic and export markets. The sale of clinker had to be restrained to boost the sale of cement.

The group as a whole has sold 60121 tonnes of clinker and 2,003,802 tonnes of cement during the half year of 2012 against 286389 tonnes and 1,677,081 tonnes respectively in the same period of previous year.

OMAN: Oman Cement's line one reopens for production

Oman Cement Company has resumed production on its first line less than two weeks after the Ministry of Environment and Climate Affairs (MECA) announced its decision to halt operations on the line following pollution fears.

In a statement to Muscat Securities Market (MSM), Oman Cement CEO Jamal al Hooti said the company has 'reached an understanding' with MECA over operation of the line's kiln.

He said, "Based on discussions with officials of the ministry and their understanding of all actions taken by the company to improve the environmental aspects, it has been agreed to re-operate the kiln."

No official from Oman Cement was available for further comment. The statement added that the company will implement an 'environmental project,' which will be 'as per the schedule agreed with the ministry.'

MECA announced the closure of line one at the company's Rusayl plant for a month on February 14 because the company failed to comply with emission standards and violated pollution control laws in the sultanate.

The company announced that clinker production would drop by 25 per cent due to the MECA decision, which would result in a 50,000 tonne drop in production.

However, in a previous statement to the MSM, the company announced that it would increase production on its second and third lines to make up for the closure of the first line.

OMAN: Cement producers expect 7% growth in demand

The cement producers in Oman anticipate an overall seven per cent growth in demand and better price realisation this year, thanks to an upward revision in prices by neighbouring UAE producers and a surge in demand from contractors building infrastructure projects. 

The prospects of better price realisation have aided a surge in stocks of both cement producers — Oman Cement Company and Raysut Cement Company — on the Muscat Securities Market yesterday. Oman Cement shares soared almost six per cent to 484 baisas on demand for more than a million shares, while Raysut Cement was up 2.21 per cent to touch 833 baisas amid demand for 140,097 shares. 

An important factor that is going to aid a surge in demand and better realisation is the price revision by UAE producers in December last year. Oman cement makers have been complaining of dumping by UAE cement makers, eating into the net margins of the former. 

“The UAE players have already incorporated a price revision of about 20-25 dirhams in December, 2011. Most of these firms were incurring losses and they can not sell it at a lower price. The industry cartel in the UAE is also planning to go for further increase in the cement prices in the coming quarters,” said Kanaga Sundar, senior research analyst at Gulf Baader Capital Markets. 

With this revision, the UAE producers are selling bulk cement in Muscat at RO23-25 per tonne and around RO22-23 a tonne in Sohar, which include a transportation cost of RO2-2.5 per tonne. This is against RO20-21 per tonne earlier. “This may favour the local manufacturers in regaining the lost market share in the Omani market. The price realisation will also increase this year.” 

The UAE demand is slowly picking up, with an improvement in construction activity, said Suresh Kumar, Head of Research at Al Maha Financial Services. 

A recent note said that 2012 will see $15.068 billion worth of contracts awarded in the UAE – an increase of 26.57 per cent from last year. The total value of current UAE construction projects is $1.249 trillion with buildings accounting for $871.6 billion. 

It appears that with the narrowing down of price difference between local and UAE producers, local contractors will prefer Omani firms for their cement requirements due to logistics reasons. 

Oman Cement has got some long-term contracts with the contractors working on the major government projects, which includes Duqm industrial hub, seaport, airports, and Sohar industrial zone. 

Oman Cement said the company’s daily average sales volume has considerably increased during the last three months. “Currently, the company has been able to sell about 7,000 tonnes of cement on a daily basis.” Oman Cement in a recent investors’ meet said the company has budgeted average cement sales of 6,800 tonnes per day this year, which is against a daily sales of 5,900 tonnes in 2011. 

As far as investor returns are concerned, Raysut Cement has brought down its dividend to 50 per cent for 2011, from 100 per cent paid in the last four years. The company’s net earnings were affected and therefore, it is unable to pay 100 per cent dividend like in the previous years. Oman Cement board has recommended a 30 per cent dividend. While Raysut’s dividend payout per cent works out to 66 per cent, Oman Cement’s payout is higher at 77 per cent, noted Suresh Kumar.

OMAN: Raysut Cement’s profit drops again

Raysut Cement, Oman’s biggest cement producer, yesterday announced a 47 per cent fall in profit before tax at RO10.17 million for the first nine months of 2011, against RO19.03 million posted for the same period last year. 

However, the profit before tax in the previous year included the price subsidy of RO1.59 million received from the government for cement import, the company said in a statement posted on MSM website. 

The decline in profit is attributable mainly to severe competitions faced by the company both in the domestic and the export markets impacting both volume and the price, which have started from the previous year. “The fall in the market value of investment also has added to the pressure.” 

Pioneer Cement for the nine-month period earned a profit of RO1.49 million in spite of the severe competitions faced by the company in the UAE market. 

Raysea Navigation, Raysut’s subsidiary that provides with shipping services, has started commercial operation during the year and has earned profit of RO470,000 during the period of nine months. 

The group has earned revenue of RO62.67 million and the profit before tax of RO11.71 million. In spite of the severe price competition from the UAE suppliers, and the volatility in the export market, Raysut Cement has achieved the sales revenue of RO44.25 million during the period of nine months ending September 2011 against RO49.88 million achieved during the corresponding period in the previous year, a decline of 11 per cent. 

The substantial developmental plan has been mooted or under execution in the central region of Oman with the facilities of modern port. It is expected that the economy in Oman would grow by 5 per cent at current prices. 

The above developmental initiatives have led to larger demand in the infrastructure industry including cement. “However, the dumping of cement from UAE suppliers continues impacting the cement industry in Oman severely. With the larger growth in the region in the coming years, the situation is expected to improve though gradually.” 

This has led the company to explore new avenues for growth in the export front and newer markets, the company’s initiative to further explore the potentials in the export market, alongside meeting the growing demands in the domestic front would place the company in a distinctly advantageous situation in the coming months and years. 

The group as a whole has produced 2,533,512 tonnes of clinker and 233,214,1 tonnes of cement during the period ended September, 2011. During the period of nine months, 1,598,942 tonnes of clinker were produced in the Salalah plant of RCC, against 1,613,317 tonnes produced in the same period of 2010. It produced 1,362,628 tonnes of cement in its Salalah plant, against 1,537,913 tonnes produced for the same period last year. 

The company has sold 1,538,901 tonnes of cement and 329,278 tonnes of clinker during the period against 1,556,788 tonnes of cement and 319,370 tonnes of clinker in the corresponding period in the previous year, registering a decline of about 1 per cent on cement and an increase of 3 per cent in sale of clinker.

OMAN: Oman Cement to increase cement grinding capacity

Oman Cement is weighing moves to boost its cement grinding capacity to keep pace with escalating demand for a commodity deemed vital for the nation’s continuing infrastructure modernisation.

Towards this end, the company has floated a tender for the selection of a consultant to study the best techno-commercial options for enhancing its cement grinding capacity. Based on the findings of the study, a tender will be floated during the next quarter for a turnkey contract for the implementation of the expansion project, Dr Abdullah Abbas Ahmed, Chairman, stated in the Board of Directors’ Report issued here yesterday.

The expansion is the latest in a series of upgrades undertaken by Oman Cement in recent years.Earlier this year, the company commissioned the second phase of the expansion of its third clinker production line, boosting clinker production capacity by 4,000 tonnes per day.

Following the commercial launch of the new kiln, which produced 191,840 metric tonnes (MT) of clinker during the first half of this year, the company has ceased imports of clinker.Contracts have also been signed for the upgrade of the pollution control system of Line-1, as well as the capacity enhancement of Kiln-1. The total investment in these upgrades is RO 14.27 million.

Meanwhile, Oman Cement registered a profit after tax of RO 7.330 million for the six months ended June 30, 2011, against earnings of RO 18.285 million for the corresponding period of 2010, which also included RO 7.338 million in government reimbursements related to previous years.Cement sales climbed to 944,566 MT during the first half of this year, against sales of 919,314 MT during the same period last year.

In value terms, however, revenues from cement sales declined to RO 24.812 million this year, against earnings of RO 28.822 million last year, as competition pushed down prices this year

.Profits were also impacted by the adverse movement in the fair value of investments due to stock market fluctuations, the Chairman stated.Commenting on the market outlook, Dr Abdullah said: “The demand for cement continues to be good in view of government spending on infrastructure projects.

Inflow of cement from neighbouring countries at low prices is expected to continue posing a threat due to the excess supply position there. Despite the strong competition locally and also from the neighbouring country, the company is confident of maintaining a sizeable market share in Oman.”

OMAN: Oman Cement plans new cement mill

Oman Cement plans to invest in a new cement mill with a design capacity of 150 metric tons per hour.

Tender documents for consultancy services as well as the Engineering-Procurement-Construction (EPC) contract, are due to be floated by the second quarter of this year, Abdullah Abbas Ahmed, Chairman of the Board of Directors, stated in the company's quarterly financial report. The announcement comes on the heels of the completion of Oman Cement's third clinker line, which will boost the company's total clinker production capacity by 4,000 tons per day. Trial production and commissioning of the new facility, built with an investment of RO 62.7 million, is underway, with performance guarantee tests due to be carried out during the current quarter.

Last month, the company signed contracts for a capacity upgrade of Kiln 1 along with the refurbishment of the kiln's pollution control systems. Both upgrades, entailing an investment of RO 14.27 million, will be completed by April 2012.

While the ongoing commissioning of the third kiln will contribute to major cost reductions and improvements in the company's profit margins, cement inflows from neighbouring countries will continue to hurt profitability, the Chairman warned in the Board of Directors Report.

Meanwhile, Oman Cement posted a 42 per cent slump in profit after tax, which declined to RO 4.151 million for the quarter ending March 31, 2011, as against earnings of RO 7.118 million during the corresponding quarter of 2010.

The lower profit was attributed to the "decrease in the selling prices of cement to face the competition". Adverse movements in the fair value of investments due to stock market fluctuations also impacted on the company's profits, the report said.

Cement sales during the quarter under review decreased marginally by 1.62 per cent to 490,865 metric tons as against sales of 495,958 metric tons during the same period last year. In value terms, revenues were lower by 17.74 per cent at RO 12.860 million during Q1 2011 as against earnings of RO 15.633 million during the corresponding period last year.

Commenting on the future outlook for cement sales, the Chairman stated: "The demand for cement continues to be good in view of government spending on infrastructure projects. Inflow of cement from neighbouring countries at reduced prices is posing a threat due to the excess supply position there. Despite the strong competition locally and also from neighbouring countries, the company maintains a sizeable market share in Oman."

OMAN: Raysut Cement shipping unit launches operations

MUSCAT -- Raysut Cement's shipping subsidiary, Raysea Navigation, has commenced commercial operations, Mohammed bin Alawi Ali Muqaibal, Chairman of the Board of Directors of the parent group, said in the quarterly report of the company's financial performance for the quarter ending March 31, 2011.

Raysea Navigation, which provides shipping services to Raysut Cement, earned a profit of RO 81,421 during the first quarter of this year.

Meanwhile, Raysut Cement posted an eight per cent decline in sales revenues, which dropped to RO 14.9 million during the three-month period ending March 31, 2011 against earnings of RO 16.3 million during the corresponding period last year. Profit before tax stood at RO 4.45 million for Q1 2011, as against RO 6.81 million earned during the corresponding period of last year, a decline of 35 per cent.

Total revenues earned by the Group during Q1 2011 amounted to RO 20.24 million, while profit before tax stood at RO 4.98 million.

"The decline in profit is attributable mainly to severe competitions faced both in domestic and the export markets impacting both volume and the price, which started from the later quarters of the previous year," the Chairman stated.

Raysut Cement's newly acquired subsidiary, Pioneer Cement, earned a profit of RO 452,012 for Q1 2011 despite severe competition in the domestic market. Production of clinker and cement at Pioneer stood at 329,220 metric tons (MT) and 262,277 MT respectively, against 331,475 MT and 356,932 MT respectively in the corresponding period of the previous year.

"The fall in demand and the resultant competition in the UAE are standing in the way of larger production," the report stated.

Of these volumes, Pioneer Cement sold 114,210 MT in the domestic market and 148,279 MT in Oman during Q1 2011, compared with 313,423 MT and 44,490 MT respectively in the corresponding period of last year.

The Group's combined output during Q1 2011 amounted to 806,907 MT of cement and 894,799 MT of clinker.

Clinker production at the Salalah plant increased 3 per cent to 565,579 MT of clinker during the quarter ending March 31, 2011, against 547,613 MT produced in the same period last year. Cement output at the Salalah plant also jumped 16 per cent to 544,630 MT this year, against 468,360 MT produced during the corresponding period last year.

The Group as a whole sold 851,844 MT of cement during the quarter ending March 31, 2011. Raysut Cement's contribution amounted to 569,355 MT of cement and 32,982 MT of clinker during this period, against 509,405 MT of cement and 91,158 MT of clinker in the corresponding period last year.

Cement exports jumped 39 per cent 179,573 MT this year from 129,646 MT during the corresponding quarter last year. Sales in the domestic market climbed 3 per cent to 389,782 MT against this year, from 379,759 MT in the corresponding period of 2010.

Commenting on the short and medium outlook for company, Mohammed bin Alawi Ali Muqaibal stated: "The plan outlay for 2011 will provide a significant boost to Oman's economy in all the sectors including the infrastructure sector. Some of the significant projects cleared by the government will have its impact on the increase in demand in the infrastructure sector, and particularly in the construction segment."

OMAN: Oman Cement to invest USD 38 million in modernization

Times of Oman reported that Oman Cement Company is planning to modernize its clinker unit and pollution control equipment to raise capacity and reduce emission with a total capital expenditure of USD 37.57 million.

Since the first production line is nearly 29 years old, OCC is modernizing the clinker unit at a total cost of USD 28.99 million. The contract is awarded to CNBM International Engineering of China, a premier company in building cement plants in the region. The work is expected to be completed by end of February 2012. The modernization of line 1 will also result in increased production from the existing level of 2,000 tonnes per day to 2,700 tonnes per day.

Also, the plant will be energy-efficient in terms of fuel consumption with an increased plant life of another 25 years. ERCOM Consulting Engineers, India has been appointed as consultant for the projects. After implementation of the two projects, line 1 of OCC will be the latest, modern energy efficient and most eco friendly plant.

In an attempt to make their plant eco friendly, the company has signed a contract with Sino Environment Engineering Development of China for modernization of the existing pollution control equipment of line 1 at a total cost of USD 8.58 million.

The modernization involves latest technology prevailing in the industry aiming at emission level of less than 10mg/nm3. The modernization work is expected to be completed by end of January 2012, said a company statement posted on MSM website. Both the contracts were signed on March 19 by OCC with CNBM International Engineers and Sino Environment Engineering Development Company.

Meanwhile, Mr Abdullah Abbas Ahmed chairman of Oman Cement said that his company has commissioned its new clinker production line with a capacity to produce 4,000 tonnes per day. We have started producing clinker from the new plant. This will help us to achieve self-sufficiency in clinker and thereby avoid imports.

He said that we will stop imports within two to three months. The project for upgradation and modernization of packaging plant has been completed. Four Autopac machines of automatic truck loading as well as three Rotopacker machines have been erected, commissioned and passed successfully the performance tests.