Ce­ment pro­duc­ers hit hard by com­pe­ti­tion, higher costs

Muscat Daily - - FRONT PAGE -

Earn­ings of Oman’s ma­jor ce­ment pro­duc­ers have been hit hard this year due to in­tense price com­pe­ti­tion from sup­pli­ers in the neigh­bour­ing coun­tries and in­creased cost of es­sen­tial raw ma­te­ri­als.

With sig­nif­i­cant drop in sales vol­umes and lower price re­al­i­sa­tion, Ray­sut Ce­ment Com­pany and Oman Ce­ment Com­pany re­ported sharp de­clines in their net prof­its for the first nine months of 2019.

Ray­sut Ce­ment, one of the lead­ing ce­ment pro­duc­ers in the Gulf re­gion, an­nounced that its group net profit fell 49.25 per cent to RO1.01mn in the nine months ended Septem­ber 30, 2019 com­pared with nearly RO2mn net profit re­ported for the cor­re­spond­ing pe­riod of last year. The sharp de­crease in profit was due to lower sales re­al­i­sa­tion per tonne of ce­ment sold, higher raw ma­te­rial costs, and in­crease in fi­nance cost due to higher in­ter­est rate on loans, Ray­sut Ce­ment said in the com­pany re­port sub­mit­ted to the Mus­cat Se­cu­ri­ties Market

(MSM).

Group rev­enue of sul­tanate’s largest ce­ment pro­ducer de­creased 2.97 per cent to RO62.13mn in the first nine months of 2019 from RO64.03mn in the same pe­riod of 2018. ‘The changes in rev­enue is due to change in pro­duc­tion mix as well as change in com­pany strat­egy re­lat­ing to the sales and lower re­al­i­sa­tion,’ Ray­sut Ce­ment said.

In spite of se­vere price com­pe­ti­tion from the UAE sup­pli­ers and the vo­latil­ity in the ex­port market, Ray­sut Ce­ment said the par­ent com­pany achieved over­all sales rev­enue of RO43.02mn dur­ing the first nine months of this year against RO43.87mn in the same pe­riod of 2018, a de­crease of 1.94 per cent. The par­ent com­pany’s net profit fell 75 per cent to RO0.67mn in 2019 from RO2.67mn in the same pe­riod of last year.

‘Var­i­ous cost re­duc­tions ini­tia­tives cou­pled with op­ti­mi­sa­tion of dis­tri­bu­tion of ce­ment, keep­ing market share and prof­itabil­ity in mind, would be the ma­jor area of at­ten­tion in the com­ing years. With those in­ter­nal ini­tia­tives the com­pany is hope­ful to min­i­mize the market pres­sure to a great ex­tent,’ Ray­sut Ce­ment said.

On the other hand, Oman Ce­ment re­ported a 57.28 per cent de­cline in net profit for the first nine months of this year. The com­pany’s net profit fell to RO2.66mn for the Jan­uary–Septem­ber pe­riod of 2019 com­pared to RO6.23mn in the same pe­riod a year ago. Oman Ce­ment’s sales rev­enue for the first nine months of 2019 de­creased 3.28 per cent year-on-year to RO36.12mn.

‘This de­cline in value of ce­ment sold is on ac­count of in­tense com­pe­ti­tion in the market re­quir­ing com­pany to adopt dy­namic pric­ing strat­egy. The de­crease in profit is mainly due to lower av­er­age sales re­al­i­sa­tion on ce­ment sold dur­ing the pe­riod,’ Oman Ce­ment said in the re­port sub­mit­ted to the MSM.

It said, ‘Though in­tense com­pe­ti­tion due to lower prices from ce­ment pro­duc­ers from neigh­bor­ing coun­tries as well as do­mes­tic pro­duc­ers had an ad­verse im­pact on our sell­ing prices and prof­its, we have taken elab­o­rate mea­sures to min­i­mize the im­pact. With the com­pany’s sus­tained on­go­ing ef­forts, we ex­pect that even with con­tin­ued stiff com­pe­ti­tion with other ce­ment man­u­fac­tur­ers, the com­pany will be able to re­tain its market share.’

(Mus­cat Daily)

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