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Oman's cement sector outperforms GCC trends

MUSCAT -- The GCC cement sector, after witnessing a catastrophic downturn in 4Q 2008, ended the first quarter of 2009 on a positive note, according to the Kuwait-based think-tank Global Investment House . Net income for the 1Q-2009 ended with a profit of $351 million as compared to a loss of $42 million in the 4Q-2008. However on a y-o-y comparison the first quarter profits were down 43 per cent. The q-o-q rise was because of improved performance by the equity markets and revival of confidence in the building and construction markets. But the tables have turned, and as expected, profits are emerging despite the economic slowdown, Global said.

On a q-o-q basis, Oman emerged out to be the best performer at 356 per cent followed by Qatar at 73 per cent and Saudi Arabia at 39 per cent. While the UAE emerged out of heavy losses and ended the first quarter with a profit, Kuwait has been the only country witnessing a decline in profit mainly due to the continued decline in their equity markets. On a y-o-y basis, Qatar witnessed the least drop in profits at 11 per cent followed by Saudi Arabia and Oman at 19 per cent and 21 per cent respectively. The UAE witnessed a decline in profits by 73 per cent while Kuwait reported a 147 per cent drop.

On an individual level during q-o-q basis, the star performer was Raysut Cement which witnessed a profit growth of 706 per cent followed by Tabuk Cement and Sharjah Cement whose profit rose by 278 per cent and 179 per cent respectively. The company which witnessed the biggest decline was Gulf Cement at 94 per cent followed by Arkan Building Materials and Umm Al Qaiwain Cement Company at 80 per cent and 79 per cent respectively. On a y-o-y basis, Kuwait Portland Cement recorded an impressive performance with a profit growth of 474 per cent followed by RAK Cement and Union Cement at 187 per cent and 94 per cent respectively.

Decliners were led by Arkan Building Material , Hilal Cement and Kuwait Cement Company at 630 per cent, 205 per cent and 157 per cent respectively. With the correction in the equity and real estate markets continuing and liquidity constraints increasing, project announcements which rose to as $2.68 trillion in April 2009 declined to $2.2 trillion in the month of May 2009. A significant decline in the projects announcement came from the UAE whose total size went down to $960 billion from $1.32 trillion in April 2009. Oman witnessed the second largest decline in project announcements to $96 billion from $110 billion.

Although it is being heard that the work on different projects in Saudi Arabia and Qatar is going on at a brisk pace, the overall project announcements in these countries went down by 9 per cent and 4 per cent to $586 billion and $209 billion respectively. On the conservative basis of demand forecast, if 50 per cent of these projects amounting to $1.1 trillion move forward and if 40 per cent of them account for building and construction related projects, then the sector is expected to witness a cement demand of close to 90mtpa on an average during 2009-15.

"As per our discussions with various companies and other industry sources, the sector will be expanding its capacity to 92mtpa by 2009 and 112mtpa by 2011. Hence the sector would be facing a surplus of cement in the coming years if the projects implementation does not increase," Global said. "We believe that the construction activity has revived in most of the countries within the GCC as we witnessed in the month of March that Saudi Arabia reported a monthly deficit in the demand and supply and was able to shrug off some of its previously piled up inventories.

Same is the case in Qatar as it being heard that the country is working on several projects and wants its construction and real estate market to be as big as that of Dubai. Other measures taken by the countries to help develop their cement sectors include the reintroduction of customs duty on import of cement. The UAE announced the reintroduction of customs duty on imported cement and steel. Following the UAE, many other countries within the region are contemplating similar measures," Global added.

By Staff Reporter

© Oman Daily Observer 2009