Raysut Cement Company investment update, Oman

Raysut Cement Company investment update, Oman
Published: 15 April 2008

Raysut Cement Company recorded total revenue of RO63.01m for the year ended December 2007, witnessed an increase of 31% from RO47.97m in the previous year. The net profit of the company increased by 46% to reach RO30.12m in 2007 from RO20.65m reported in the previous year. The company is expected to continue witnessing growth in both revenues and profits, driven by the healthy market demand for cement and helped along by its scaled up clinker/cement grinding capacity, thanks to the commissioning of the company’s new cement capacity in August 2007.
The total revenue of the company was RO63.01m for the year ended December 2007, an increase of 31% from RO47.9m in the previous year. Healthy growth in revenue can be attributed to 18% increase in the sales volume of the company. Company sold 2.25mn tons of cement as against 1.88mn tons in 2006. Average realizations firmed up to RO28.29/ton from RO25.5/ton in the previous year.
Cost of sales of the company was RO35.06m during 2007, 30% higher than in the previous year. The increase in cost of sales can be attributed to the increase in energy consumption due to the higher production and also because of 126% increase in the cost of imported cement. Fuel, gas and electricity charges of the company rose by 16% to RO6.58mn in 2007. Despite a y-o-y increase, cost as a percentage of sales declined to 55.6% as against 56.1% in 2006.
The gross profit increased by 33% to RO27.95mn in 2007. As a result of a better realization prices and healthy growth in sales volume, the gross profit margin increased to 44.4% in 2007 from 43.9% in 2006.

RCC has an early mover advantage in the Oman following its capacity expansions in 2005 and 2007. The positive effect of that expansion has already been felt by the company, with more than doubling of its net profit in 2007. The company is effectively poised to take advantage of not only the boom in its home market, but also in its major export market of Yemen. The coming years should continue to see over 50% of its sales revenues coming from exports, with a large part from exports to Yemen. The growth momentum seems to be continuing in 2008 as well. The new capacity which is being promulgated by the company if falls in plan and comes online by beginning of 2010, would result in a change in valuations.

Source: Global Investment House, Kuwait