Suez Cement 1H earnings rise on cost control efforts

Suez Cement 1H earnings rise on cost control efforts
Published: 23 July 2014


Suez Cement Group of Companies (SCGC) posted an increase in revenues and earnings for the first half of 2014 which it attributed in part to cost control measures. While the outlook for cement demand is more encouraging, energy shortages remain a key concern for the Italcementi group company.

SCGC, which operates a network of five production facilities across Egypt, reported a 23 per cent increase in consolidated revenues in the six months to the end of June 2014. Recurring EBITDA was six per cent higher versus the same period of last year. However, higher corporate income taxes coupled with an absence of foreign exchange gains led to a 20 per cent drop in net profit after non-controlling interest.

Moderate demand growth
Cement demand grew moderately over the period, increasing by just one per cent YoY. The slow growth was attributed to Egypt’s political transition, particularly in the first half of 2014.

Moving forward, SCGS anticipates that the construction industry’s recovery will attract new investment and help boost economic output. It also believes that “newfound government stability and the announcement of several large national projects will boost Egyptian demand for cement.”

Energy concerns
The company also stressed that production capacity was down by 55 per cent due to ongoing challenges with energy supplies. To meet market demand, SCGC had to import clinker, resulting in a “sharp surge” in operational costs, according to the group. The shortage of cement also resulted in market price adjustments. On a more positive note, investments in energy efficient processes and waste fuel production have “begun to pay off”, it added, mitigating the need for some import activities.

As the summer continues, the company cautions that power cuts and fuel shortages are likely to remain major issues for cement producers. “Fuel and energy shortages will prolong challenges to meeting cement production targets, meaning SCGC will still be required to import more cement than usual until it can adequately boost power generation through alternative means,” according to a company statement.

To tackle these challenges, SCGC said it remains focused on investing in energy-efficient initiatives to help boost output. These include developing alternative fuel strategies which incorporate waste derived fuels and coal, helping the company shift its energy mix and reduce dependence on natural gas and fuel oil.