Arabian Cement to pull out of joint venture
Saudi manufacturer to bail out of concrete company with Italcementi
Arabian Cement Company has pulled out of a joint venture cement company following “accumulated losses” on the project.
The Jeddah-based supplier is to liquidate its investment in International City Company for Concrete, a project funded jointly with Italcementi, the Italian manufacturer, which has SAR 100m ($26.66m) paid-up capital. ACC said it has already taken a provision of SAR 25m ($6.66m) – half its original investment - against losses on the project, it told the Tadawul stock exchange yesterday.
ACC will be able to “exit its investment” at completion of the agreement.
International City of Concrete was launched in March 2009 by the two companies as one of the world's largest ready mix plant in Rabigh, around 90km north of Jeddah. Its purpose was to supply concrete to the construction of King Abdullah Economic City, a mega development that has mixed success over the last few years.
At launch the companies predicted a rapid expansion of business in the west of the Kingdom with the construction of new plants serving the Jeddah, Makkah, Taif and Madinah markets over the next three years.
The ailing venture contrasts with the otherwise strong year for ACC, which posted net profits for the first six months of SAR 227.8m ($60.74m), up 40% against the equivalent period yesterday. The company and its listed peers are benefitting from huge construction activity in Saudi Arabia, as government spending across buildings, infrastructure, social housing, education, health and aviation, which is raising the demand for cement and other building materials.
Italcementi, based in Bergamo near Milan, saw revenue for the first half of the year rise 2% to EUR 2.45bn ($3.51bn), with net profit more than doubling to EUR 187m ($268m) from EUR 81.8m ($117.2m) the year before.
The company has one of the most diverse distribution networks, selling clinker, ready mix and aggregate from Europe to North America, Asia and north Africa. The company said it sold less in Egypt since the start of the year due to the civil revolution in the country, though Morocco posted further business growth.
Arabian Cement Company shares fell 0.77% to SAR 38.5 yesterday in Riyadh.