GCC cement sector profits increase – report

GCC cement sector profits increased 21.2 per cent in 1Q12 and net profits increased from US$359.5m in 1Q11 to US$435.6m in 1Q12, according to a report by Global Investment House (GIH).

However, net margins witnessed a fall of 90.4 bps. Revenue, on the other hand, increased 24.3 per cent to reach US$1.26bn, the report said.

Gross margins witnessed a 233.6bps increase in Q1, 2012 to reach 43.7 percent as compared to 41.4 percent, which was due to increase in selling price along with drop in prices of fuel, it said.

Country-wise, the UAE and Oman, which used to report declining sales revenue, reported higher revenues due to the better operating environment in both countries. The UAE top line increased, more indication that it could reach the bottom, sales revenue of the UAE increased 7.7 per cent to reach US$ 258.1m bringing gross margin back to double digit of 10.5 per cent, the report said.

Cement prices in the GCC averaged around US$ 66.7/t in 1Q compared to US$66/t enjoyed in 1Q11, a 1.1 per cent increase mainly due to price increase in Saudi Arabia. The Kingdom's cement prices increased 11.3 per cent YoY during the quarter compared to the previous year. The UAE, Oman and Kuwait witnessed declining prices because companies slashed prices to win contracts, according to the report.

All cement prices in the GCC witnessed a decrease except the Kingdom and Qatar. Kuwait marked the largest decline of prices by 4.5 per cent to reach US$75.8/t in 1Q compared to US$ 79.4/t during the same period a year ago. Kuwait continued to sell the highest average of cement prices as compared to other GCC countries, the report said.