The construction sector has been one of the biggest casualties of the property downturn, and the industry's suppliers are also feeling the impact. Arkan Building Materials is one company with direct exposure to the sector. Until construction picks up again, Arkan may struggle to find business. To make matters worse, the gap between demand from contractors and supply from materials providers is expected to widen. Arkan's stock price has fallen 43.8 per cent since the start of the year, the greatest decline among stocks in its sector. Its trading volume is also down, says Hettish Kumar, an analyst at Global Investment House. He has a "sell" rating on the stock.
Arkan operates through its wholly owned subsidiaries, Emirates Cement Factory in Al Ain and Emirates Block Factory in Mafraq. Arkan's subsidiaries can produce 850,000 tonnes of clinker and 1.2 million tonnes of cement and concrete blocks annually. Despite the construction slowdown, the company had a net profit of Dh19.2 million for the first quarter compared with a loss of Dh91m for the same period last year. Mr Kumar expects the company's second-quarter results to be in line with the first quarter, at best. The Dh91m first-quarter loss last year was attributable to the performance of Arkan's investment portfolio - which consisted of stocks in the UAE markets and property - when the global downturn occurred. The company trimmed its debt in the first quarter of this year by 6 per cent to Dh790.1m, from Dh840m last year.
As demand for new homes and, by extension, building materials declines, other companies in the sector are expected to be hit. "Although results were better than last year, we continue to have a negative stance on the company and the UAE cement sector," Mr Kumar said. halsayegh@thenational.ae
