The GCC cement industry did not perform well during the first half of this year as major real estate projects were halted in the wake of the global recession. According to a Global Investment House report, the performance of cement and building materials companies in the region was adversely impacted due to shelving of major construction ventures.
GCC cement companies witnessed 13.8 per cent drop in top line revenues and announced a poor 12.4 per cent decrease in profits for the 1H of 2010.
Net profits decreased from $938.8m in 1H09 to $822.1m in 1H10. Financial restructuring and strength of cement companies is visible in 1H10 as assets and equity increased 0.1 per cent and 1.2 percent, respectively.
On the other hand, debt and liabilities decreased 8.1 per cent and 2.8 per cent to reach US$2.2bn and US$3.3bn, respectively. Debt to equity witnessed a 90bps decrease in H1, 2010 to reach 22 percent. In addition, financial charges for H1, 2010 enjoyed a 60 per cent decline from the previous year to US$16.4m. Debt managed to decrease as companies focused more on reducing debt and enhance assets quality.
Non-core income contribution to the bottom-line was however minimal at 14.1 per cent during 1H10 as compared to previous highs of over 30-40 per cent in the earlier periods. The contribution has gone down as most of the companies have shifted their focus away from risky real estate and property investment and their investment value has already been wiped off because of the previous tumults in the equity and real estate market.
Kuwait and Qatar maintained gross margins of 33.2 per cent and 41.6 per cent, respectively. Gross margin of both countries witnessed a huge increase from the same period a year ago, increasing in Kuwait from 25 per cent and in Qatar from 22.7 percent in H1, 2009, the increase is accompanied by lower cost of sales.