Arabian Cement Q2 net profit drops 8.6%

Arabian Cement Q2 net profit drops 8.6%
Published: 21 July 2009

Saudi’’s Arabian Cement Co posted on Monday an 8.6 per cent decline in net profit for the second-quarter, in line with a trend of declining profits by Saudi cement companies due to a year-long export ban.

Arabian Cement made a net profit of SAR82.6m (US$22.03m) in the three months to June 30, compared to SAR90.4m a year earlier, it said in a statement posted on the Saudi bourse website.

"The reason for the decline in profits ... is due to the rise in operational costs and the funding for setting up new units, as well as losses in affiliated companies in the previous six months," the firm said.

The company posted an 11.7 per cent decline in operational profits, which amounted to SAR87.5m for this quarter.

There has been a trend of declining profits by Saudi cement companies in the quarter, ranging from 2.3 per cent by Saudi Cement Co to a more severe drop of 45 per cent by Tabuk Cement.

After domestic cement prices soared last year as the country, which is undergoing multi-billion dollar infrastructure projects, faced a cement shortage, the government imposed an export ban to lower prices.

The ban, compounded by the introduction of new cement production lines, caused an oversupplied local market that pushed cement prices down and profits dropped along with them.

In May the government allowed cement producers to export a portion of their surplus stock on the condition that they sell their product in the local market for SAR200 a tonne.

Next year Arabian Cement will launch its first plant abroad, with the capacity of 2Mt, but will hold off further expansion plans until market conditions improve.