Egypt cement industry faring well, says analyst

Egypt cement industry faring well, says analyst
Published: 05 March 2009

As the global recession drags on, shifting market dynamics indicate that the Egyptian cement industry, despite mixed performances by industry companies on the stock exchange, may fare better than many other struggling industries.

Despite a slump in the real estate market and falling prices, a boom in lower and middle-income housing should allow the industry to persevere.

The real estate sector is expected to be in decline, based largely on a lack of consumer confidence at the high end of the market.

"Slower growth across the board in most sectors leads us to expect that the manufacturing and services sectors have been quickly hit by the global and domestic slowdown," economist Reham ElDesoki of investment bank Beltone financial said in a letter to investors.

"The sectoral growth, however, was uneven, with the deceleration in growth in the construction sector being less sharp than in other sectors."

Since seeing its numbers falter severely at the end of 2004, the cement industry has gained momentum in recent years, recording significant long-term growth. The industry has been able to maintain a pattern of growth even since the start of the economic recession last summer.

"The growth in cement and steel sales in the second quarter of 2008/09, driven by rural demand due to building restrictions, and the demand for low and middle-income housing, leads us to expect better performance of the construction sector for the remainder of the fiscal year until June 2009," she added.

Companies in the cement sector have also, generally, posted earning increases. Misr Qena Cement announced two weeks ago that its 2008 earnings were 9 percent higher than they were in 2007.

Over the same stretch of time, Suez Cement posted a 14 percent rise in profit for the first 9 months of 2008, versus the same stretch the previous year.

In January of this year, Beni Suef Cement announced that the Egyptian government had approved its plans to increase cement production dramatically. It now plans to launch a new production line that will allow it to increase outputs by 1.5Mta of cement. There is no word, though, as to when this increase in production might take place.

Under new measures to regulate the retail price of cement in the domestic market, cement producers now have to declare their final consumer rates and print prices on packages. Retailers are obliged to provide weekly stock inventories to the trade ministry.

The new rules were announced in February, after retail cement prices increased because of demand from Europe and because a strike by truckers disrupted distribution.

At one point, cement was selling at LE 800 ($143) a ton in some parts of the country.

According to the new measures, factories will also have to inform the Internal Trade Unit at the ministry of the prices on the third Thursday of every month.