Union Cement Co. posts AED9.8m loss for first-half

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Union Cement Company posted a net loss of AED9.8 million against an AED90 million profit for the first six months of 2010 compared to the same period last year in a familiar result for manufacturers squeezed by declining sales and prices.

The Ras Al Khaimah-based manufacturer saw revenues fall 23% to AED303.5 million with the cost of sales over the period by 5.7%, or AED16.6 million. After-tax, the company saw a loss ofAED9.81 million, down from AED90.1 million between January and 30th June in 2009.

Cash flows from operating activities also declined, from AED146.1 million to AED68 million, a drop of more than 50%.

The company produces and markets various types of Portland cement mostly through direct sales, and has stakes in Union Cement Norcem Company and RAK Energy. The company saw net values of its for-sale investments reverse from AED4 million to an AED4.6 million loss. Its net book value of property, plant and equipment fell AED922,000.

Second-quarter results also saw heavy losses in comparison to the previous year. It posted a net loss of AED2.1 million from an AED50.8 million profit last year, with revenues declining by 11% to AED173 million and sales costs rising more than AED40 million to AED165 million.

“The present global financial crisis and real estate mortgage has some impact on the company business as it leads to a considerable reduction in the selling price,” the company stated, adding that it is battling to reduce production costs “by means of various possible measures”.

Many cement companies in the GCC have posted falls in profits and sales compared to 2009 based on dwindling projects in which they might be contracted as a supplier.

Analysts point out that UAE firms are at a particular disadvantage as they are not subsidized by the government. Oman Cement Company, for example, received more than OR7 million from the Omani government as compensation for the period between 2007 and 2008 when domestic demand required imports to shore up supply. Today, a quieter market in Oman will see less cement imported, resulting in a decrease in costs for such companies. One analyst at NBK Capital declared the cement boom in the country as “over”.

RAK Cement earlier this month also posted a net loss for the second quarter, of AED4.2 million, compared to an AED21.7 million profit for the same period last year.

Hettish Kumar, senior analyst at Global Investment House in Kuwait, told CW earlier in the year that many Omani and UAE companies have been selling into each other’s market to retain revenues.