Oman cement output rises

Until recently, Omani cement manufacturers were victims of the cheap inflow of cement from UAE, but the Oman Daily Observer has reported that domestic cement producers are ramping up production to meet rising local demand and that in export markets such as Yemen and some East African nations.

In 2011, imports met 25% of cement demand in Oman, mainly from UAE where a weak construction sector resulted in excess supply of cement. However, UAE producers recently increased cement prices. Cement prices for local Omani players declined by 19% over last year and now stand at an average of OMR25/t (US$64.9/t).

Now with operational costs rising, UAE players are no longer in a situation to offer cement at lower prices, which gives a strong case for market share capitalisation by local players. This is evident from the first-quarter results of Oman Cement, a leading producer in Oman.

Oman Cement said that the higher demand for cement during the current quarter is driven by ongoing infrastructure and construction activities in the local market. For the 1Q12, the cement sales volume increased by 13.8% on YoY basis. The company achieved revenues of OMR13.965m, an increase of 9% on YoY and 20% on QoQ.??Oman Cement’s clinker production during the quarter rose to 538,000t against 277,000t during the same period in 2011 with the new kiln producing 321,000t of the total output. Currently, its capacity utilisation stands at 90%.

Gulf Baader said that the gains in the international oil prices have made the government continue with its aggressive spending towards the infrastructure and construction activities, which has boosted the cement sector. With most of construction projects in Oman in implementation stage, the cement demand in the local market will remain at higher levels. This is clearly evident from Oman Cement’s improvement in its sales volume during the 1Q.

However, Raysut Cement sales revenues in the 1Q fell by 8% to OMR14.9m compared with OMR16.3m during the corresponding period last year. Profit before tax dropped 35% to OMR4.45m during the quarter from OMR6.81m during the same period of last year.

Mohammed bin Alawi Ali Muqaibal, chairman of Raysut Cement, said that the decline in profit is attributable mainly to severe competition faced both in domestic and the export markets, impacting both volume and the price, which started from the later quarters of the previous year.

Mr Ali Muqaibal said that overall, Omani cement companies are likely to witness unabated growth in forthcoming quarters aided by volume improvement. While Oman Cements plant is located in the fast-growing Muscat region helping in meeting cement demand in northern side of Oman, Raysut Cement is located in the southern part of the country focusing more on the south.

Due to close proximity to construction developments in this region, Oman Cement incurs lower transportation costs. The close proximity to Yemen, its major exporting market is also an additional advantage.

Pioneer Cement, Raysut’s UAE subsidiary, currently focuses on northern Oman, apart from the UAE market.