PHOTO
27 July 2015
MUSCAT: The rise in gas prices has adversely affected the profit margins of industries in the Sultanate. The first half financial results announced by industries like cement, ceramic tiles, steel and glass manufacturers show that the high gas tariffs have led to higher cost of production leading to profit loss. "Decline in topline growth owing to realisation pressures and cost escalation as a result of natural gas price hike have impacted the profit margins of these companies in the first half", opined Suresh Kumar, Research Head at Al Maha Financial Services.
The two main cement producers, Raysut Cement and Oman Cement, have said that production costs increased dramatically under the new price scheme.
Approved in January this year, the price of natural gas to companies has doubled from a rate of 41 baisas per standard cubic metre (cc) from 20.5 baisas per standard cc, with an inbuilt annual increase of 3 per cent in subsequent years.
The rise, according to analysts, has been part of a response from the authorities to bridge some of the gap in the national budget left by weaker hydrocarbons revenue.
In early March the IMF's country head, Ananthakrishnan Prasad, said that Oman needed to implement reforms to keep its deficit in check, with the scaling back of gas and energy subsidies at the top of the list of priorities.
If adopted, the measures would further impact Omani industries, with those in the rapidly developing petrochemicals sector hit with higher raw materials prices and power dependent producers confronted with steeper electric bills.
Oman Cement's total expenses rose by 8.2 per cent in the first six months of 2015 compared to the same period of 2014.
"We have continued our efforts to minimise the impact by better cost and selling price management," Oman Cement said while announcing the first half results. At the same time, production fell by 2.33 per cent at 1,008,779 tonnes of cement in the first half of 2015, from 1,032,898 tonnes for the same period last year, mainly due to limited availability of clinker.
In June 2015, Oman Cement disclosed that due to operational difficulties it had to prolong the shutdown of one of its kilns. The kiln, with 4000t/day clinker production capacity, was closed for planned maintenance, which was to be completed in early June 2015.
Oman Cement warned that the prolonged shutdown of a kiln would have an impact on its second-quarter performance.
The profit before tax for the six-month period dipped by 39.26 per cent to RO 6.02 million for the first half of 2015 from RO 9.92 million for the same period of last year, which also included an amount of RO 2.1 million being income on sale for available-for-sale investments.
Raysut Cement, meanwhile, posted a 33 per cent drop in second-quarter net profit.
The largest cement firm by market value in Oman, the company made RO 4.93 million in the second quarter of the year, compared with RO 7.36 million in the same period of 2014.
The company posted a first-half profit after tax of RO 10.96 million compared to RO 15.59 million a year ago.
Al Maha Ceramics reported total revenue of RO 5,055,949 compared to RO 5,676,778 a year ago.
The company's net profit before tax was RO 1,518,522 compared to RO 1,201,245 a year ago. Net profit after tax stood at RO 1,331,059 compared to RO 1,058,395 a year ago.
Al Maha said earlier, "the change in natural gas price may affect the projected profits of the company in 2015 by approximately 5 per cent. The company plans to mitigate this financial impact by reviewing the pricing across different market segments and implementation of certain cost reduction and efficiency enhancement initiatives".
Al Jazeera Steel Products Company said its earnings results for the six months ended on June 30, 2015 showed a total revenues of RO 41,440,958 compared to RO 49,359,669 a year ago. Net profit after tax was RO 1,437,535 compared to RO 3,461,359 a year ago.
MUSCAT: The rise in gas prices has adversely affected the profit margins of industries in the Sultanate. The first half financial results announced by industries like cement, ceramic tiles, steel and glass manufacturers show that the high gas tariffs have led to higher cost of production leading to profit loss. "Decline in topline growth owing to realisation pressures and cost escalation as a result of natural gas price hike have impacted the profit margins of these companies in the first half", opined Suresh Kumar, Research Head at Al Maha Financial Services.
The two main cement producers, Raysut Cement and Oman Cement, have said that production costs increased dramatically under the new price scheme.
Approved in January this year, the price of natural gas to companies has doubled from a rate of 41 baisas per standard cubic metre (cc) from 20.5 baisas per standard cc, with an inbuilt annual increase of 3 per cent in subsequent years.
The rise, according to analysts, has been part of a response from the authorities to bridge some of the gap in the national budget left by weaker hydrocarbons revenue.
In early March the IMF's country head, Ananthakrishnan Prasad, said that Oman needed to implement reforms to keep its deficit in check, with the scaling back of gas and energy subsidies at the top of the list of priorities.
If adopted, the measures would further impact Omani industries, with those in the rapidly developing petrochemicals sector hit with higher raw materials prices and power dependent producers confronted with steeper electric bills.
Oman Cement's total expenses rose by 8.2 per cent in the first six months of 2015 compared to the same period of 2014.
"We have continued our efforts to minimise the impact by better cost and selling price management," Oman Cement said while announcing the first half results. At the same time, production fell by 2.33 per cent at 1,008,779 tonnes of cement in the first half of 2015, from 1,032,898 tonnes for the same period last year, mainly due to limited availability of clinker.
In June 2015, Oman Cement disclosed that due to operational difficulties it had to prolong the shutdown of one of its kilns. The kiln, with 4000t/day clinker production capacity, was closed for planned maintenance, which was to be completed in early June 2015.
Oman Cement warned that the prolonged shutdown of a kiln would have an impact on its second-quarter performance.
The profit before tax for the six-month period dipped by 39.26 per cent to RO 6.02 million for the first half of 2015 from RO 9.92 million for the same period of last year, which also included an amount of RO 2.1 million being income on sale for available-for-sale investments.
Raysut Cement, meanwhile, posted a 33 per cent drop in second-quarter net profit.
The largest cement firm by market value in Oman, the company made RO 4.93 million in the second quarter of the year, compared with RO 7.36 million in the same period of 2014.
The company posted a first-half profit after tax of RO 10.96 million compared to RO 15.59 million a year ago.
Al Maha Ceramics reported total revenue of RO 5,055,949 compared to RO 5,676,778 a year ago.
The company's net profit before tax was RO 1,518,522 compared to RO 1,201,245 a year ago. Net profit after tax stood at RO 1,331,059 compared to RO 1,058,395 a year ago.
Al Maha said earlier, "the change in natural gas price may affect the projected profits of the company in 2015 by approximately 5 per cent. The company plans to mitigate this financial impact by reviewing the pricing across different market segments and implementation of certain cost reduction and efficiency enhancement initiatives".
Al Jazeera Steel Products Company said its earnings results for the six months ended on June 30, 2015 showed a total revenues of RO 41,440,958 compared to RO 49,359,669 a year ago. Net profit after tax was RO 1,437,535 compared to RO 3,461,359 a year ago.
© Oman Daily Observer 2015
