Cement sector players in Oman are scaling up their production capacity to meet the ever-rising local demand and also from the country’s export markets like Yemen and some East African nations. Till recently, the Omani cement manufacturers were victims of cheap inflow of cement from UAE. In 2011, imports met 25 per cent of cement demand in Oman, mainly from UAE where weak construction sector resulted in excess supply of cement. The UAE companies recently increased their cement prices. Cement prices for local players declined by 19 per cent over last year and now stand at an average of RO 25 per tonne.
Now with the rising operational costs, the UAE players are no longer in a situation to offer cement at lower prices, which gives strong case of market share capitalisation by local players. This is evident from the first quarter results of Oman Cement, a leading producer in Oman. “The higher demand for cement during the current quarter is driven by ongoing infrastructure and construction activities in the local market”, Oman Cement said while releasing its results. For the first quarter of 2012, the cement sales volume increased by 13.8 per cent on year on year basis.
The company achieved revenues of RO 13.965 million, an increase of 9 per cent on year on year and 20 per cent on quarter on quarter. “The revival of demand in the cement sector and improvement in the market share of the local players aided by higher volumes owing to higher infrastructure and construction activities have helped the company achieve this growth”, says Gulf Baader Capital Market.
Oman Cement’s clinker production during the quarter scaled up to 538,000 metric tonnes against 277,000 during the same period in 2011. The current capacity utilisation stands at 90 per cent. The output from new kiln stood at 321,000 metric tonnes out of 538,000 metric tonnes of clinker produced during the quarter.
“The gains in the international oil prices have made the government to continue with its aggressive spending towards the infrastructure and construction activities which has spelled boon for the cement sector. With most of construction projects in Oman in implementation stage, the cement demand in the local market will remain at higher levels. This is clearly evident from Oman Cement’s improvement in its sales volume during the first quarter”, says Gulf Baader.
At the same time, Raysut Cement’s sales revenues in the first quarter fell by 8 per cent to RO14.9 million, compared with RO 16.3 million during the corresponding period last year. Profit before tax dropped 35 per cent to RO 4.45 million during the quarter from RO 6.81 million during the same period of last year. “The decline in profit is attributable mainly to severe competitions faced both in domestic and the export markets impacting both volume and the price, which started from the later quarters of the previous year,” the Chairman of Raysut Cement, Mohammed bin Alawi Ali Muqaibal, says.
Technical analysis of the QSE index
This week’s uptick was on lower volumes and that indicates weakness of that up-move. However, we are generally optimistic on the index as positive momentum has been picking up. We maintain our suppor