Eastern Province Cement profile

EPCC is one of the leading cement producers in Saudi Arabia and one of the largest manufacturers of Ordinary Portland and Sulphate Resisting Portland Clinker and Cement in the Kingdom of Saudi Arabia _ according to a new report from Global Investment House, Kuwait. EPCC produces various types of cement, such as ordinary portland cement (OPC), sulphate resisting cement (SRC) and portland pozzolanic cement. The company produced 2.699Mt of cement in 2004 as compared to 2.374Mt of cement in the previous year. The clinker capacity utilization was more than 100 per cent during 2004. About 65-70 per cent of its sales comprise bulk sales, bagged cement (mostly OPC) constituting the rest. The ready-mix companies (RMCs) are its main customers, picking up nearly the entire bulk sales of the company. Small traders too pick up a part of its bulk sales as well as its bagged cement. Most of its sales now are in the domestic market to meet the high domestic demand, though the company has in the past exported around 336,000t in 2004 which was mainly to the neighboring countries of Bahrain and Kuwait.

In the first seven months of 2005, the company produced around 1.31Mt tonnes of clinker, up 5.3 per cent as compared to the corresponding period of the previous year. There is not much change in the production levels as the plants had been operating at more than 100 per cent capacity in the said period. However, this is likely to increase significantly once the expansion plans come on-line. For the first 7-months of 2005, the cement production stood at 1.55Mt as compared to 1.44Mt in the corresponding period of 2004.

The company has a gas-based plant and the company sources gas from the Aramco plant through a 50km gas pipeline. The company is increasing its clinker capacity from 2.2Mta at present to 3.2Mta which is expected to cost around SR200m. The new production line represents the final completion of the company’s upgrading plans for the grinding machines, control room and analytical equipment. The financing of the project is expected to be met by a mix of loan from SIDF and internal accruals. The new capacity is likely to go on stream by the end of 2005.

The company is also expanding regionally as it has taken a 30 per cent stake in the Arabian Yemeni Cement Company in Yemen. It  signed an agreement with a number of Saudi and Yemeni businessmen to establish a large cement factory in the Yemeni city of Mukkala at an estimated cost of US$200m.The Arabian Yemeni Cement Company, with a capital of US$100m, will supply clinker and ordinary cements to meet the region’s requirements. The plant will have the capacity of 1.2Mta and is expected to come on-stream by end of 2007.

EPCC’s strategy seems to be to garner the maximum leverage from the booming real estate sector. It was one of the first to expand its production line. The company’s revenues and profitability are expected to leap once the new production line starts. The company is not only looking at the Saudi market but seems intent on exploring new territories (Yemen). We believe that the company will not face any pressure in the short term even with the new capacities and new companies coming on-line as the demand for cement continues unabated. The company was a major exporter in the past but has now reduced its exports to a minimum to cater to domestic demand. But it benefits from the proximity to Kuwait and Bahrain which are also experiencing construction boom and can provide company with growth if demand in Saudi tapers down in future. The company is also hopeful of exporting to Iraq and sees it as a big market, once it stabilizes.