‘Vicious price competition’ continues to beset Oman’s cement industry

‘Vicious price competition’ continues to beset Oman’s cement industry - Oman Observer

OMAN DAILY OBSERVER / 8 NOV 2021

Growth-driven: Oman Cement, Raysut Cement press ahead with expansion plans

CONRAD PRABHU

The country’s two principal cement manufacturers have again bemoaned pricing wars and product dumping as banes of an industry banking on a post-pandemic economic recovery to bolster their bottom-lines and profitability.

Oman Cement Company and Raysut Cement Company, which are both listed on the Muscat Stock Exchange (MSX), posted lower earnings for the nine months ended October 31, 2021 which they attributed to a combination of factors, including pandemic impacts, price competition, higher input costs and other market factors.

Majority state-owned Oman Cement summed up the challenges facing the industry: “The cement market in Oman has continued to witness an intense and vicious price competition between major suppliers which include local cement companies as well as cement manufacturers from neighbouring countries,” Dr Abdullah Abbas Ahmed, Chairman of the Board of Directors, said in the Directors’ report for the nine months ended October 31, 2021.

“Cement production had to be restricted due to adverse impact on demand of our cement due to continued dumping of imported cement and clinker in local market at unreasonably low prices,” he further noted.

While the company posted a 4.66 per cent increase in clinker production to 1.807 million tons this year, cement output declined 8.83 per cent to 1.748 million tons.

Revenues from cement sales for the nine-month period dipped 9.40 per cent to RO 34.414 million, down from RO 37.984 million for the corresponding period of 2020. Net profit after tax was marginally lower at RO 2.787 million this year, down from RO 2.814 million for the corresponding period of 2020.

Raysut Cement Group, currently the largest manufacturer by capacity, reported a total clinker production of 2.396 million tons (-8 per cent) and cement output of 2.601 million tons (+0.4 per cent) this year.

Group revenue totalled RO 72.306 million for 9M 2021, up from RO 65.239 million for the corresponding period of last year. The uptick was driven by increased sales in the northern part of the country following the acquisition of Sohar Cement Factory.

However, the Group posted a post-tax loss of RO 2.216 million this year, as against a loss of RO 10.365 million for the corresponding period of 2020. Contributing to the higher group revenue this year were a number of factors, notably record cement production in the history of the group, growth of new markets and customers, and a decision by the Ministry of Energy and Minerals to roll back an increase in gas prices for 2021.

Despite the challenges, both companies are pressing ahead with ambitious capacity expansion plans. ?Muscat-based Oman Cement is going ahead with the upgrade of its flagship plant at Rusayl with the addition of a new production line of 10,000 tons per day (tpd) of clinker capacity. It is also upgrading its existing Line-3 facility to 5,500 tpd.

“On successful commissioning of new production line, the company will review optimal options either for decommissioning or alternate utilisation of old production Lines 1 and 2, which will be depending upon relevant factors including market demand and take a decision in the best interest of optimising the productive use of its assets and resources,” the Chairman said.

Salalah-based Raysut Cement said it is constructing a cement grinding unit in Duqm with a production capacity of 750,000 tons of cement per annum at a cost of about $30 million.?