Suez Cement Group of Companies (SCGC), part of the Italcementi Group, saw revenues decline three per cent in the first three months of the year versus the same period of 2014.
EBITDA for the quarter also fell by 49 per cent, mainly due to rising fuel prices resulting in a sharp 66 per cent drop in net profit. Unforeseen pressures on the construction sector as a whole were said to have depressed overall demand for cement products and, coupled with higher energy costs, this negatively impacted SCGC’s earning potential, according to the company. Despite challenging conditions, SCGC maintained its market leadership, it added.
Egypt’s domestic demand for grey cement fell 1.7 per cent, leading to a 2.4 per cent decline in SCGC's sales. The company was further impacted by strike action at the Suez plant and interruption in quarrying operations at the Helwan works. Both issues have since been resolved.
SCGC is forecasting a more solid performance in the next few quarters following announcements in the company’s energy diversification programme. The coal conversion projects at the Kattameya and Suez plants have been completed. Management is predicting significant cost savings will be seen in the near future, thereby improving SCGC’s margins and mitigating the effect of higher energy prices. The company is set to begin similar coal power projects at the Tourah and Helwan plants over the next two years.
SCGC maintains its positive view for the full year as it believes the construction industry will witness a resurgence that will attract new investment following optimistic presentations at the Egypt Economic Development Conference (EEDC), held in Sharm El Sheikh on 13-15 March 2015.
This is in addition to overarching economic growth expected from the economy thanks to Egypt's return to political 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. The firm anticipates that its energy programme will gradually improve its manufacturing capacity utilisation and have a positive impact on the cost of production. The launch of coal and petcoke energy generation goes hand-in-hand with SCGC's 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 the Tourah old plant facilities combined with improvements in Tourah's new plant is a clear illustration of this strategy.