Oman’s Raysut Cement, yesterday reported a 21.3 per cent fall in net profit at OMR19.03m (US$49.4m) for the first nine months of 2010, hit by dumping from neighbouring UAE producers, coupled with slack demand in export markets.
This is against a net profit of OMR24.18m registered for the same period last year. The company’s sales revenue also dipped by 30.5 per cent to OMR49.88m from OMR71.80m during the period under review.
“Raysut Cement has been faced with twin problems. One the one side, UAE producers have been dumping cement in northern Oman, while on the other, there has been a slowdown in export demand, especially in neighbouring Yemen due to pressure from Saudi Arabian companies,” said Kanaga Sunder, senior research analyst of Gulf Baader Capital Markets.
The overall sales volume and unit price realisation were under tremendous pressure. “Raysut has reduced cement prices, but the company was unable to compete with its UAE counterparts in Sohar and Muscat regions,” he noted. Proximity to Sohar was one of the big advantages of the UAE producers, and they were even meeting the bulk users’ demand in Muscat.
“Transport cost for the UAE cement companies to sell their products in Oman is only OMR1-2/t. Bulk cement consumers depend on the UAE companies.”
“Average selling price in domestic market is estimated to have decreased by 10 per cent on year on year and five per cent on quarter on quarter. We believe the overall trend in volume and selling price is in line with our view,” said a research note prepared by EFG Hermes.
In order to withstand competition, the company has tried to optimise higher revenue and margin with highly competitive pricing and cost reduction initiatives.