Suez Cement Group sees 4Q gains

Suez Cement Group sees 4Q gains
Published: 27 February 2015


With improved market conditions, Suez Cement Group of Companies (SCGC) of Egypt saw a 2.5 per cent increase in fourth-quarter revenues to EGP1.539m and progress in EBITDA which gained 11.5 per cent to EGP300m. Net profit after non-controlling interest increased 15.2 per cent during the same period to EGP129m.

For the whole year, the Italcementi group company reported that sales increased 22 per cent to EGP6.52m, while recurring EBITDA improved 8.8 per cent to EGP1.154m compared to 2013 figures. But higher corporate income taxes coupled with an absence of foreign exchange gains were responsible for an 8.4 per cent drop in net profit after non-controlling interest to EGP493m compared to EGP538m a year earlier.

EBITDA gains were also driven by the company's downstream activities in transportation and ready mix cements as well as SCGC's paper bags subsidiary, which saw an EBITA increase of 26.5 per cent. Cement activities accounted for a gain of 6.3 per cent.

The strong revenue performance was largely due to cement price increases due to an unprecedented surge in production costs and product shortages. Overall, clinker production decreased as a result of severe energy supply issues that impacted each of SCGC's plants and subsidiaries differently. The Tourah operation felt the greatest pressure from expensive clincker imports that were necessary to satisfy Egypt's growing demand.

In addition, SCGC was negatively affected by energy costs (gas, mazut and electricity) that rose between 25- 35 per centin 2014. The company did not let these economic pressures, including a 40 per cent drop in industrial production capacity, impact their employment rates or benefits packages. This was partially due to SCGC's commitment to the implementation of energy efficient processes throughout its five plants as well as further emphasis and utilisation of alternative fuels, which helped mitigate the drop in production as well as limit the impact from growing clinker imports. The group will go ahead with the deployment of coal power at all five plants over the next two years, a factor that is also expected to put a stop to some importing activities.

Outlook
Moving forward, SCGC believes the construction industry's recovery will continue to attract new investment. This is in addition to positive economic growth thanks to Egypt's new found government stability and the future implementation of several large national projects. SCGC expects that these factors and more will converge to boost demand for cement across the country. However, power cuts and fuel shortages are likely to remain major issues for cement producers. Fuel and energy shortages will also prolong challenges to meeting cement production targets.

SCGC's plans to diversify its energy mix with waste, petroleum coke and coal are underway. In September 2014 the operational test run for coal started at the Kattameya plant, with a similar program launching at the Suez facility in December. The company anticipates that this will gradually improve the firm's manufacturing capacity utilisation and have a positive impact on the cost of production. The company said that the launch of coal and petroleum coke energy production goes hand-in-hand with its focus on reducing its environmental impact through the implementation of state-of-the-art dust filter technology and streamlined manufacturing processes. The recent closure of Tourah 1 is an illustration of this strategy, the group highlights.

SCGC added that it remains focused on investing in energy efficient initiatives and environmental performance. This includes developing alternative fuel strategies that incorporate waste-derived fuels and coal, which will shift the company's energy mix and improve its production capabilities by reducing SCGC's dependence on natural gas and mazut.