Efficiencies and cost controls reflect the Group's long term strategy amid a very competitive building material market in UAE.

Abu Dhabi, UAE; 03 November 2016

Arkan Building Materials Co. PJSC (ADX: ARKAN) (“Arkan” or “the Group”), a leading construction and building materials company in the UAE, announced its financial results for the first nine months of 2016.

Arkan recorded revenues of AED 595.8 million for the nine months, compared to AED 666.4 million recorded for the same nine-month period in 2015. The company managed to increase the sales volumes in most of the divisions, despite challenging market conditions with a lower projects pipeline in the Company’s captive market. However, the continuous decrease in market prices since the beginning of the year led to the variance.

Management increased operational efficiencies across all Business Units by boosting the production on one hand and reducing the cost on the other hand, particularly in the fields of energy consumption, maintenance and procurement. Industrial waste was introduced to substitute minerals in the production of cement and blocks, achieving substantial savings while preserving the environment.

Controls over General & Administration expenses resulted in a reduction of AED 7.2 million from last year, a reduction of 9%.

Eng. Jamal Salem Al Dhaheri, Chairman of Arkan stated: “Sustainable growth was and will continue to be the backbone of Arkan’s strategy, and I’m delighted with the efforts of the management team to continuously gain further market share and contain cost in this challenging market environment.”

This resulted in the Group’s gross profit margin increasing to 26%, leading to 2% increase compared to last year.

The Group achieved a net profit of AED 54.8 million, as projected. During the same period last year, the net profit was AED 81.0 million. Operation efficiencies and cost containment controls contributed to absorb partially the impact of the heavy rain storm that occurred in the month of March as reported in a previous statement by the Company. The cement plant returned to full operation at the end of July 2016.

The Group’s balance sheet remains strong with cash and cash equivalents of AED 62.5 million.

Commenting on the Company’s financial results, Arkan Chairman Eng. Jamal Salem Al Dhaheri said: “Arkan’s operating business has been resilient and we have continued to increase our market share, by building on current client relationships and expanding our presence in Dubai and further afield with more specialised products and services. We are confident our Company is ahead of the competition and continues to set the benchmark in the local industry.”

Post the period end, on 23 October 2016, the Company announced that its shares would be open for trade by foreign investors up to 49% of its share capital from 24 October 2016. The share price jumped by more than 30% in the days following the announcement.

Operations Highlights:

Cement

Arkan’s cement business unit reported revenues for the nine months period of AED 434.4 million compared to AED 518.3 million in the corresponding period.  Net profit was AED 56 million compared to AED 68 million.  As highlighted in the first quarter, the decline in profit and revenue is mainly attributed to the interruption in production at Ain Cement Factory due to the fierce rain storm that occurred in the month of March. In addition the decline is attributed to severe pricing pressure due to overall excess capacity in the UAE market and competitors re-directing excess clinker export capacity to the local markets. 

Blocks and Dry Mortar

Revenue from Arkan's Blocks segment (Blocks) increased to AED 76.2 million at the end of 30 September 2016, compared to AED 52.5 million in the same period of 2015. Loss from Blocks amounted to AED 52 thousand as compared to a loss of AED 4.2 million for the same period last year. The turnaround in this business is due to higher production and sales volumes as a result of intensified market development efforts of the business. Higher production and sales volumes on the blocks side were offset by a loss of AED 1.06 million by the Dry Mortar plant. Such loss was expected and budgeted for as the Dry Mortar plant is on the ramp up phase being the first year of commercial operations.

The combined revenues for the Group’s Pipes division, which includes GRP and PVC, stood at AED 70.6 million with net profit of AED 5.5 million, a decrease from the AED 77.6 in revenues and net profit of AED 6.0 million recorded for the previous year, primarily due to lower sales volumes from PVC division, as orders in hand could not be delivered due to delays in infrastructure projects.

Bags

The Group’s Bags business unit recorded revenues of AED 14.6 million and net profit of AED 1.6 million, representing a decrease in revenue from AED 18.0 million from the previous year, but an increase in net profit from the AED 0.9 million recorded for the corresponding period from the previous year.

Company Investments

The Company’s share of profit from associates as at 30 September 2016 was AED 6.8 million as compared to AED 17.0 million in the previous year, due to the lacklustre performance of the real estate sector in UAE during the period The Company received cash dividend of AED 24 million [9M 2015: AED 20 million] from this investment.

Net Debt

The second payment of AED 66.7 million (AED 133.4 million in total for the year) on the Company’s AED 1.2 billion loan has been completed from the company’s internal cash generation. The loan is payable over nine years semi-annually commencing March 2016 and was obtained to finance the construction of the Company’s new cement factory.

- Ends –

For investor relations enquiries, please contact:
Brunswick Group
Phone: +971 (0)2 234 4600 / +971 (0)4 446 6270
Email: arkan@brunswickgroup.com

About Arkan
Arkan Building Materials Co. PJSC (ADX: ARKAN), is a public joint stock company specialising in manufacturing of building and construction products in the UAE.  Arkan’s vision is to build a large integrated building products business that serves the local and regional construction industries. Arkan’s portfolio companies include Emirates Cement Factory, Emirates Blocks Factories, ANABEEB and Al Ain Cement Factory. The Company is also developing Arkan Dry Mortar, a high-capacity dry mortar plant located in Al Mafraq, which will produce a range of dry mix products. 

For further information, please visit our website: www.arkan.ae

© Press Release 2016