Oman Cement in profit despite 'stiff competition'

The company has imported clinker and cement to meet domestic demand.

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Oman Cement Company saw a rise in gross and net profits for the first six months of 2010 compared to the previous year after procuring more materials to make up for the fall in production.

The company’s gross profits improved from OR12.2 million to OR13 million, representing an increased margin from 34.5% to 45.3%.

After-tax profits stood at OR18.285 million for the period compared with OR11.178 million last year, a rise of 63%.

Cement sales dropped to 919,314 MTS from just over OR1.1 million for the January-to-June period last year. Production dropped 11% - from 1,028,804 MTS to 914,700 MTS - due to a decline in the amount of clinker produced, which itself was caused by the suspension of two of its major kilns for repair work and the effects of cyclone Phet.

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The company procured 293,683 MTS of clinker and 4,602 MTS of cement to make up the shortfall and meet demand. However, the purchase was offset by a fall in procurement price saw operating profits increase against last year, from OR11.17 million to OR18.25 million.

This includes OR7.36 million the company received from the government - recognised as income for the period - as compensation for importing materials to meet local demand during 2007 and 2008, which costs more overall than domestic production.

“Stiff competition in the market an oversupply situation created due to [a] huge inflow of cement from neighbouring countries and an impact on sales, which saw lower volumes by about 19%,” the company stated in its report.

Hettish Kumar, senior analyst at Global Investment House, told CW earlier this year that Oman and UAE companies were the two most frequently attempting to sell into each other’s markets to try and retain profits.

Annualised share earnings have increased, however, from OR0.06 last year to OR0.11 up to 30th June 2010. The company’s stock closed up almost 3% yesterday at OR0.68 per share. This is down on its high point of OR0.73 on 25th April though has gained from its 26th May year-to-date low of OR0.64.