Qatar National Cement sees gain in 2010 net profit

QNCC is the dominant player in the country for cement.

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Qatar National Cement Company posted a rare upturn in profits for cement companies in 2010 as its first-half results revealed a marginal increase in after-tax gains compared to the same period last year.

The Doha-based supplier saw a 1.3% rise in profits, from QR253.3 million to QR256.7 million, net of QR258 million gross profits which were QR87 million higher than the January-to-June period in 2010.

The results were achieved despite a 32.6% fall in revenues, which was cushioned by a fall in the cost of sales by more than half to QR328 million – an unusual result among its cement rivals. This was due to the introduction of its fourth plant last year, which meant it no longer needed to import cement to meet local demands, it said in the financial results.

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The company’s net cash from operating activities jumped by almost QR100 million, from QR226.8 million to QR322.8 million. Cash and cash equivalents at 30th June also represented a turnaround, standing at QR90.1 million compared with a deficit of QR414 million on the same date in 2010.

The company is a major supplier of ordinary Portland and sulphate-resistant cement, as well as hydrated lime, calcined lime and washed sand.

Hettish Kumar, senior financial analyst at Global Investment House in Kuwait, said the company’s sales are due to the fact that it is the dominant supplier in the country. “There is one other supplier but it is very small,“ he explained. “The majority of business goes to QNCC. It has a good, local supply of raw materials and fresh plants, and its margins are good.”

He added that the majority of the projects in which it is involved are going ahead as planned, though this is not necessarily linked to the increase in cash.

On 19th May the company agreed a murabaha financing deal with Islamic Bank of Asia, which would see the company receive US$45 million for general corporate financing.

The Shariah-compliant murabaha structure is more commonly associated with property purchases, in which the borrower pledges 20% of a property before the lender buys the property and sells the rest to the borrower at a higher price.

“This facility may be just to fund expansion, though the amount is very small,” Kumar added, pointing out that Qatar companies often invest in subsidiaries rather than unrelated industries such as real estate.

QNCC’s results run counter to the woes seen by other big regional suppliers that have been squeezed by smaller order books, higher production costs and a decline in both price and projects.

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, according to its financial statement made public mid-July.

Abu Dhabi listed Gulf Cement Company has seen profits slashed by almost a half in for the last six months and by more than three-quarters for Q2 against the same period last year.

Saudi-based Southern Province Cement Company posted a 13% fall in net profits for the second quarter, with Qassim Cement falling 8.3%.