RAK Cement sees net profits wiped out in 2010

Sales have fallen more than 10% in the second quarter compared to 2009.

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Ras Al Khaimah Cement Company continued the losses experienced by many producers of the building material as it posted a net deficit for the last three months of AED4.2 million – a significant reversal from the AED21.7 million profit for the same period last year.

The manufacturer’s sales declined more than 10% from AED65.7 million to AED59 million and the cost of sales swelled by more than half from AED41 million to AED62.1 million.

Half-year results – the first two quarters combined - saw heavier losses, reversing a AED51.1 million net profit into a AED1.266 million net loss, with sales for the six months declining by 20.9% to AED129.2 million. Total assets decreased by 1.7 % compared with 30 June 2009. Shareholders' equity decreased from AED 798.5 million to AED767.4 million.

The company’s management has cited the restriction on the natural gas supply – a problem faced this year by Oman-based Construction Materials Industries & Contracting – as a key hindrance to production, along with the falling demand for cement, together with the lower prices per tonne.

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Many UAE, Saudi Arabia and Oman cement suppliers have seen depleted balance sheets this year based on a drought of projects, leading to smaller orders and lower prices. Abu Dhabi-listed Gulf Cement saw a 47% fall in net profits for the last six months against the same period in 2009, with Oman’s Raysut Cement falling by nearly a quarter.

Analysts at NBK Capital point out that the UAE might be the most pressured for the rest of this year as Oman suppliers have gradually boosted their local capacity and will cease to import cement to satisfy local demand.

The market will still be muted in the Sultanate, some say. Radjat Bagchi at NBK Capital declared the cement boom in the country as “over”.

Yesterday Ras Al Khaimah Cement Company declined 2.7% on the Abu Dhabi Securities Exchange to 71 fils. Its stock has fallen from AED1.1 at the beginning of March.