Sinai Cement suffers after strikes on pipeline

A series of explosions that have rocked Egypt's main gas pipeline through the Sinai Peninsula is taking its toll on the companies that need the gas to operate.

Sinai Cement is a prime example. The Cairo company yesterday said it would have to use fuel oil for a longer period because of disrupted access to natural gas supplies. The use of fuel oil will cost the company 25 per cent more than if it used natural gas, the local newspaper Al Mal reported.

This week's explosion, the fourth this year, came after unknown gunmen staged repeated attacks on the pipeline in efforts to destroy what has become a political symbol of the Mubarak regime. The pipeline sends natural gas to Jordan and Israel. The last attack prompted analysts tracking the stock to reassess their view of the business. CI Capital last month downgraded the company to "hold" from "strong buy" as the repercussions from the blasts became clearer.

Sinai Cement's plant was also previously attacked by activists, forcing it to shut down for 11 working days, which has not helped the company's share price.

Yesterday its shares rose 2 per cent to 45.02 Egyptian pounds, although they are trading 25 per cent lower than before the protests began in February. Cement companies have endured months of difficulty as property companies, their main clients, are embroiled in long-winded legal cases over the sale of state land. First-quarter profits at Sinai Cement declined 25 per cent to 116.8 million Egyptian pounds, compared with the same period last year, as demand dried up.

Sinai Cement's peers have not escaped unscathed either.

Suez Cement, Egypt's biggest producer, was last month cut to "sell" from "neutral" and had its 12-month share price estimate cut to 32 pounds by EFG-Hermes Holding. Cement prices are falling and expected to drop further, analysts have said.

Revenue generated through exports to mostly African countries provided some relief, but an extended ban, that ended late last year, has kept this to a minimum.


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