High cement prices and asset sales boost profits
Oman Cement Company (OCC) reported a 93 per cent increase in profits in 2009, following high cement prices and asset sales.
The company made a net profit of OR24.16m ($62.75m) in the 12 months to 31 December 2009, up from OR12.5m in 2008.Total revenues for the year were OR71.9m, compared to OR66.7m in 2008.
Profits for the fourth quarter of 2009 stood at OR7.25m, an increase of OR5.5m, or more than 300 per cent, from the same period in the previous year. Total revenues for the quarter were OR19.21m, slightly down from OR19.55m in the fourth quarter of 2008.
The increase in profits was due to the high selling price of cement during the year. OCC was able to sell cement at OR30 a tonne locally in the fourth quarter of 2009, compared to the OR26 a tonne that producers were getting in the UAE. The company also gained from the sale of securities from its bond portfolio.
Analysts say it will be difficult for the company to sustain such large profit margins in 2010, because of excess capacity in the UAE following the downturn in the local real estate market.
“We believe there are currently major UAE cement producers selling their product 15 per cent lower, actively targeting Oman, particularly north Oman which is seen as the key market for OCC,” says Nishit Lakhotia, senior analyst at Bahraini investment bank Sico. “This will force OCC to lower their selling price to an average OR26 a tonne in the coming year.”
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