Raysut Cement half-year profits fall 21% on 2009

Raysut has increased cement production by a fifth.

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Oman’s Raysut Cement Company saw a fall in half-year net profits by more than a fifth and sales slip more than a quarter compared to last year even as production levels increased.

The Muscat-based company announced the figures yesterday, pointing out that as the construction sector in the country grows at a modest 5.6% Raysut Cement aimed to “optimize higher revenue and margin in the extraordinary economic environment with highly competitive pricing”.

Net profits after tax fell 21.1% from OR17.3 million to OR13.6 million.

The company has faced increased inflows of cement from rival UAE firms as dwindling demand in the two countries has increasingly seen cross-selling over the borders. Sales for the first six month of this year stood at OR36 million, down from 27.2% from OR49.48 million posted for January to June in 2009.

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Cost of sales, which can have a significant impact on margins, declined by 34%, with the total amount of cement produced for the half year increasing from 875,000 1.08 million MT, up 20%. Raysut’s net assets increased by just over OR5 million to OR100.38 million.

However, the company also announced that the government had accepted its claim for OR6.12 million as compensation for the higher cost of imported materials it was requested to provide to meet local demand during 2007 and 2008.

Rival Oman Cement Company last month was successful in its claim for OR7.34 million for the same period. Like Raysut it has also increased production capacity.

Cement produced by Oman Cement during the first quarter increased to 495.1 kilotons from 474.8 kilotons during the corresponding period of last year. During this period, it increased its clinker imports to over 179.8 kilotons and profits have suffered as a result of the government directive to sell at a low price.

“The decline in profit may be attributable mainly to the competition from the external market since the second half of the previous year, demand recession in the export markets creating pressure on sales volume as well as pricing, and also the fall in prices of marketable securities at the end of June 2010,” Mohammed Bin Alawi Ali Muqaibal, chairman of Raysut Cement Company stated.

“Cost reductions are on the positive side reducing the impact, however.”