Profits crumble in Egypt's cement sector

What's Down: Egypt's cement companies post declines in profit as demand for the building material declines in the post Mubarak era.
Egypt's cement sector is paying a price for the revolution that ousted Hosni Mubarak from the presidency six months ago.

Suez Cement, the country's largest cement maker by value, yesterday recorded a first-half net profit of 412.4 million Egyptian pounds, down 37 per cent from the same period a year earlier. Its subsidiary Tourah Portland Cement said net profit for the first half declined 12 per cent to 167.9m pounds.

Shares of Suez Cement were down 0.3 per cent to 37.87 pounds in the first half, while Tourah Portland Cement was up more than 30 per cent to 38.79 pounds during the same period. Cement companies have endured months of difficulty as property companies, their main clients, have been embroiled in protracted legal cases over the sale of state land.

The price of cement appears to be on a modest decline, moving from 492 pounds a tonne to 491 pounds, but those numbers do not tell the whole story. "We learnt from local producers that some of them tend to compensate traders through cash incentives," said Basma Shebeta, an analyst at CI Capital in Cairo. "These producers are actually selling their production at cheaper prices to stimulate their local sales." After accounting for cash incentives, the price paid is estimated to range from 450 to 470 pounds a tonne. Local producers are expecting a price war if major cement producers do not stop cutting prices. Cement is expected to fall further over the coming months, particularly with new capacity coming on stream next month from Arabian Cement and a factory owned by Egypt's defence ministry.

Ms Shebeta expects prices to drop as much as 4.9 per cent this year and 5 per cent next year.

"Its due to several factors," she said. "The first of these is companies' attempts to fuel demand for cement in light of the recent stagnation in the local market. Additionally, considerable capacity additions are scheduled for this period, and competition from cheaper imported cement is intensifying," she said.

 

halsayegh@thenational.ae

Published: August 1, 2011 04:00 AM

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