Raysut Cement sees improvement in cement demand

Raysut Cement sees improvement in cement demand
Published: 01 March 2010

Raysut Cement Company, the Sultanate’s largest cement producer, foresees an improvement in cement demand during 2010, although competition is expected to be stiff in the face of "discounted" supplies from neighbouring and regional markets. Mohammed bin Alawi bin Ali Muqaibal, Chairman of the Board of Directors, said higher government outlays coupled with lower inflation will pave the way for better growth in the future, but competition will remain a factor for the foreseeable future.

Despite the strong competition, Raysut Cement recorded a significant increase in sales during 2009, which climbed to 2.92Mt of cement and clinker last year, against 2.77Mt in 2008. The company’s revenue went up to OMR89.35m in 2009 compared to OMR89.08m in the previous year. Domestic cement sales increased by 7.9 per cent.

However, the economic downturn impacted the export market more severely with a 12 per cent decline in sales volume. Clinker sales, on the other hand, soared to 136,825t during 2009, as against 55,623t sold during the previous year. The rehabilitation of cement grinding plants and the long delivery time for the arrival of replacement parts resulted in a fall in cement production, which decreased to 1.66Mt in 2009 from 2.12Mt in the previous year.

Clinker output at 2.043Mt was roughly on par with the 2008 output of 2.045Mt. To support its market share, the company imported cement at competitive prices from various parts of the world, selling 1.13Mt of the commodity during 2009, against sales of 0.575Mt in the previous year. Gross profit stood at OMR28.35m in 2009 compared to earnings of OMR31.59m in the previous year.

The gross profit was impacted due to price competition, as well as a larger share of imports in the sales volume. Profit before tax however climbed to 32.03 million Omani rials in 2009 from 30.97 million in 2008. This improved position was mainly attributable to the increase in the profits of associate companies, and the rise in the value of marketable securities. The Profit after Tax stood at 28.68 million Omani rials, against 27.11 million in the previous year -- an increase of 5.8 per cent.

"In an extraordinary economic environment with slower demands in various markets and competitive pricing, the company has achieved excellent result with a higher revenue and higher net profit," the Chairman stated. "The higher expenditure plan by Government and lower inflation than before, coupled with the positive trends elsewhere, will pave the way for better growth in the near future in general. However, competition in the cement industry is expected to continue for some time," he added.

Given the improving regional scenario, the output in the Middle East is expected to grow from 2 per cent in 2009 to 4.5 per cent in 2010 and 4.8 per cent 2011. But supplies of cement at "highly discounted prices" have undermining cement pricing policies in Oman and the wider region, the Chairman noted. As a result of such cheap inflows, the company faced stiff competition in its north Oman market, as well as in the export segment, particularly during the second half of the year, he said.

Significantly, Raysut Cement is exploring prospects for a "substantial expansion" in capacity through the acquisition of facilities outside the country, as well as through the addition of facilities to its existing set-up. With the aim of achieving the full utilisation of its clinker capacity, the management is looking at additions to its grinding facilities around the third quarter of 2010.

Further, the company has been continuously exploring new markets and strengthening its traditional export markets in East Africa, Somalia, Zanzibar, and the Gulf states, the Chairman added.

Source: Oman Daily Observer 2010