Raysut profits down 38.5%? on competition, Oman

Raysut profits down 38.5%? on competition, Oman
Published: 31 October 2011

Raysut Cement saw profits fall 38.5% for the first nine months of this year compared to the same period last year.

The company achieved OMR10.17m (US$26.41m) before tax, down from OMR19m (US$49.34m) the previous year. Total sales of cement and clinker slipped 11.2% to OR 44.2m ($114.79m), though the cost of sales remained steady, resulting in a 16.2% gross profit.

Taxation will be included at the end of the financial year, the company added to investors last week.

The company sold 2.53Mt of clinker and 2.33Mt of cement over the period. It has fully integrated the production and revenue of Pioneer Cement, the UAE-based firm it acquired last year, though rival supply from the emirates have hampered the company.

“Severe competition from UAE suppliers and in the export markets, as well as the disturbances in certain countries in the region, has led to strain in demand and resultant moderated productions,” Mohammed bin Alawi Ali Muqaibal, Raysut Cement chairman.

Emirati suppliers – most of them based in Ras Al Khaimah - have been selling into the Oman market to cover the shortfall in sales following the steep slump in building activity in the UAE, analysts say, causing saturation in Oman and eroding prices.

It is the second consecutive statement by Muqaibal regarding the pressures from cross-border selling. In March, he stated to investors that UAE competition had forced cement prices down by a quarter last year compared to 2009. The company, however, has been expanding its capacity and boosting exports to meet the shortfall.

Last year, the company added a new grinding unit and set up Raybulk Navigation which bought a new ship to boost its exporting powers.

The company said it is banking on the stable Oman economy to maintain government spending levels to boost construction and cement demand, specifically from “continued larger surplus from the rise in oil prices during the year, larger public investment program particularly in the infrastructure segment” the latter of which should help cement suppliers.