News

UAE cement sector sees decline

By Staff Published: 2011-11-27T07:37:00+04:00

The cement industry in the UAE continues to suffer as companies in the country report declining profits.

According to the GCC cement sector quarterly report by Global, the third quarter of this year saw reduced profits of the sector.

The report highlights the consolidated net income of listed cement companies in UAE for 9M11 declined by 86.6% to USD10.9mn as compared to USD81.3mn in 9M10. Out of the total nine listed cement companies, five of them were in losses totaling Dh112.4mn ($30.6mn). While on a QoQ basis the 3Q11 results were in loss of Dh8.4mn as compared to a Dh12.6mn profits for 2Q11. Decline could be attributed to slower sector activity due to Ramadan season occurring August, it added.

“Overall UAE cement sector consolidated revenues reversed course and increased on a YoY basis to $688.9mn during the 9M11period while 3Q11 revenue was also up QoQ by 0.1% to $224.7mn. Reason for the decline in the revenue was because of low demand in the country as more cement inventory piles up and cement related activities slowdown.”

Cement price in UAE further went down by 5.3% to $49.0/ton (Dh179.8/ton) in 9M11 as compared to an average price of $51.8/ton (Dh190/ton) in 9M10. Recently, the players gathered to stop further decline in the prices which materialized during 9M11, when the Cement Manufacturing Association agreed to maintain prices between Dh170/ton to Dh190/ton in November and increase it by 5% during December.

Gross margins of the sector continued to deteriorate and reached all-time lows of 4.8% in 9M11. Debt levels of the sector declined to Dh491.3mn in 9M11 as compared to Dh572.3mn in 9M10, a 14.2% decrease. Debt as percentage of assets decreased to 13.4% earlier, being 15.3% in 9M10.

The report pointed out that the sector was operationally in losses of $24.7mn, however, contribution from non-core income portion added handsomely to the bottom-line. Non-core income reached USD42.3mn during 9M11, however, they are down 37.8% as compared to a year ago. The contribution touched 387% during 9M11 as compared to 83.6% in 9M10.