Qatar National Cement six-month net falls 16%

Qatar National Cement dominates its home market.

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Qatar National Cement Company said net profits for the first half of 2011 fell 16.5% to QAR 521m and by 13.6% in the second quarter against the same periods last year as sales declined in the gas-rich state.

The country’s only listed cement supplier’s results compared to a QAR 256.79m net profit last year. Revenues since the start of the year up to 30 June declined 11% to QAR 521m from QAR 586.6m last year, according to its financial statement for the period, published this week.

The company holds a near monopoly in the domestic construction market as its production of ordinary Portland cement and other types is part subsidised by the government, analysts say.

The company has been a key beneficiary from the surge in Qatar’s construction market, particularly in the infrastructure sector. NBK Capital says the company was able to capitalise from the absence of cement imports last year.

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Cost of sales declined in line with the fewer sales, as did the company’s other income, despite in its rise in takings from associate companies. Cash from operating activities rose 3% to QAR 332.81m, though an outlay of more than QAR 20m in plant and equipment saw the company post a QAR 24.5m outflow in its investment activities.

Earnings per share fell to QAR 4.36 from QAR 5.23.

Second quarter net profits fell 13.6% to QAR 246.2m against QAR 285.23m the previous year and down 10.5% against the previous quarter. Operating profits between April and the end of June fell 34.5% to QAR 92.23m from QAR 140.95m last year and down 12% against the QAR 104.89m posted in the first quarter. First-quarter net profits had risen 2% against last year.

At the start of August Global Investment House revised its price estimate of the company to QAR 117 from QAR 114 and advised a ‘hold’ rating on the stock.

Analysts add that unless there is an influx of clinker into the country, Qatar National Cement Company is set for a stronger second half of the year than the first.

“There may be a fall in profits in the first half as there is always a lag between the announcement of projects and the volumes picking up,” said one in Kuwait, who declined to be named.

“But if you follow the trend for the company over the last 18 months then the year should get better. This might not translate into a rise in the stock price but in terms of sales there won’t be a problem.”

Qatar National Cement shares were trading 0.09% higher by 2pm Monday at QAR 111.1.