Oman income tax law change slashes 60% of Raysut Cement's profits
A 3% increase in the sultanate's income tax rate, announced earlier this year, reduced the cement giant's nine-month profits from $43m in 2016 to $17.5m in 2017
Changes to the income tax law in Oman led to a 60% year-on-year (YoY) reduction in Raysut Cement's nine-month (9M) profit for 2017.
Furthermore, local market competition, and social disturbances in export markets, contributed to reduced sales volumes for the company.
Royal Decree No 9/2017, published in the sultanate's Official Gazette on 26 February, 2017, raised the rate of income tax in Oman from 12% to 15%.
In a set of documents outlining the company's 9M 2017 financial performance, Ahmed bin Yousuf bin Alawi Al Ibrahim, the chairman of the board of directors at Raysut Cement, said the 3% increase in income tax was one of the factors that affected the firm's profits for the period.
Initiatives to cut costs and optimise distribution were also promised by the chairman.
The group's profit after tax was valued at $17.5m (OMR6.73m) for 9M 2017, 59.6% lower than profits worth $43.3m (OMR16.66m) recorded during the corresponding period of last year.
Raysut Cement recorded $142m (OMR54.71m) as 9M 2017 revenues, a 22.5% decline compared to corresponding figures for last year, worth $183.3m (OMR70.56m).
Profit before tax for the first nine months of this year amounted to $23.7m (OMR9.11m), worth less than half of last year's pre-tax profit, worth $47.8m (OMR18.42m).
Group-wide operating profits for the period reduced by 54.8% to $21.2m (OMR8.15m), compared to 9M 2016's corresponding values of $46.9m (OMR18.05m).
"This is because of lower volume of sales, owing to competition in local markets, and in export markets – mainly in Yemen – due to [social] disturbance which resulted [in the] loss of some areas and increase in costs of electricity, gas, and coal with effect from January 2017," Al Ibrahim added in his statement.
"Various cost reduction initiatives, coupled with optimisation of distribution of cement, keeping market share and profitability in mind, would be the major area of attention in the coming years.
"With those internal initiatives, the company is hopeful of minimising pressure to a great extent," he added.
Raysut Cement's expansion plans include operations through Al Wusta Cement, a joint venture it is part of with Oman Cement Company.
Al Wusta Cement Company will build a 50ha plant in Duqm, it was announced this October.
The Special Economic Zone Authority of Duqm (SEZAD) granted a plot of land to Al Wusta last month.
In separate missives issued to the Muscat bourse, both firms said Al Wusta would build a cement plant on the plot.
This July, it was announced that consultants appointed by Oman Cement and Raysut Cement had each submitted a draft their feasibility studies about a potential project in Duqm, according to a report by Oman Daily Observer.