Competition from UAE hits Omani cement firm

Muscat: Severe competition from cement producers in the neighbouring United Arab Emirates (UAE), the ongoing socio-economic disturbances in Yemen, and higher energy costs have affected sales revenues and net earnings of the Sultanate’s largest cement producer - Raysut Cement Company.
“There has been severe competition across markets, coupled with socio-political disturbances in Yemen. Unabated supply of cement from the UAE due to surplus capacity and price decline has caused a dent in prices and volume of sales in the northern markets of Oman,” the company’s annual report stated.
Public spending
Also, the construction sector’s growth is mostly driven by public spending, and the region as a whole is under pressure from the global situation, as well as the oil price fluctuation.
Raysut Cement further stated that the demand for cement in Oman fell due to lesser construction activities. In the UAE, excess capacity is leading to severe competition and Pioneer Cement is continuing sales at a competitive price.
The main markets for Raysut Cement are Oman, Yemen and East Africa, while Pioneer Cement depends on the UAE and Omani markets, the report added.
The revenue of Raysut Cement group fell by 22 per cent to OMR71.87 million in 2017, from OMR92.59 million the previous year.
“This is because of lower volume of sales, both in local and export markets. A declining market (21 per cent), lower price realisation, lower production, higher costs resulting from higher energy prices, raw material cost, and maintenance costs have impacted the group’s bottom line,” the report stated.
Cost escalation
The company’s costs have been affected by a 69 per cent increase in power tariff, from OMR0.016/KWH to OMR0.027, resulting in an additional cost of OMR1.698 million.
This was further followed by an increase in gas price, costing some OMR0.272 million to the parent company.
The group’s net profit also plunged by 72 per cent, from OMR20.71 million to OMR5.81 million, during the period under review.
Dividend proposal
The board of directors of Raysut Cement has proposed a cash dividend of 29 per cent of the paid up capital, subject to the approval of shareholders at the annual general meeting. Also, Raysut Cement’s new packaging plant is expected to be completed in the first quarter of 2018.
Further, Raysut Cement, along with Oman Cement Company, has registered a new company named Al Wusta Cement Company, which has been allotted 500,000 square metres of land for a new cement plant in Duqm.
The project implementation will continue, subject to the outcome of a final feasibility study report.