Union Cement Co (UCC) yesterday reported profits for the first half rose by 50 per cent to Dh90m.
The company realised the bulk of its profit, despite a 20 per cent decline in sales revenues, thanks to a 35 per cent decline in its costs. Last year, UCC began bringing online multi-fuel burners in its kilns, which has decreased its dependence on fuel and diesel in favour of cheaper coal fuel.
The investment in the new burners has doubled UCC’s gross margin to 29.9 per cent despite experiencing a decline in its sales revenues from Dh515m in the first half of 2008 to Dh409m this year.
"Now because most cement companies have moved to multi-fuel kilns, and there is less disruption affecting the availability of natural gas, the companies do not have to rely solely on expensive fuel or diesel," Mala Pancholia, Al Mal Capital equity research analyst, said.
Pancholia said the sector will continue to experience nearly-flat growth until demand increases from the local construction sector. If domestic turnover rises due to a pickup in volumes, it could be a sign of recovery in the construction sector, she added.
"The improvement [in gross margins] is not a surprise," she said. "We expected it should have begun last year as companies switched to cheaper fuel options."