MUSCAT -- Raysut Cement Company has reported a 21 per cent decline in net profit before tax for the nine months ending September 30, 2010. Earnings eased to RO 19.03 million this year, compared with a profit before tax of RO 24.18 million during the corresponding period last year, Mohammed bin Alawi Ali Muqaibal, Chairman of the Board of Directors, stated in the Chairman's Report issued here yesterday.
Sales revenues slumped 30 per cent to RO 49.88 million this year, from RO 71.30 million during the same period last year. Gross profits were 19 per cent lower at RO 18.6 million this year, from RO 23 million earned during the same period last year.
Mohammed bin Ali attributed the decline to, among other factors, severe competition and demand recession. "The decline in profit may be attributable mainly to the severe competition from the external markets coupled with demand recession in the export markets put pressure both on sales volume and pricing, and also to the fall in prices of marketable securities compared with that in the last year. The prices of marketable securities, however, are recovering its ground since the beginning of the year. Cost reduction initiatives and drastic reduction in import have significant favourable impact on holding the profit at a level that otherwise would not have been possible to attain," he said.
During the period under review, the government had fully settled the company's claim of RO 6.12 million, being the excess of cost over sales price of cement imported to meet the demands of customers during the years 2007 and 2008. Of this claim, an amount of RO 4.53 million was already recognised in the books of relevant periods, while the balance of RO 1.59 million was recognised in the revenue of the current period, the Chairman said.
Despite the lower earnings, production of clinker during the nine months period ended September 30, 2010, was marginally higher at 1,613,317 MT, as against 1,570,693 MT produced during the same period last year, an increase of 2.7 per cent. Cement output jumped 20 per cent to 1,537,913 MT this year, as against 1,280,331 MT produced during the corresponding period of previous year. This significant increase in production offset any need for imports, as was the case during the previous year, the report said.
The company sold 1,556,788 MT of cement and 319,370 MT of clinker (aggregating 1,876,158 MT) during the first nine months of this year, as against 2,221,882 MT of cement and 96,772 MT of clinker (aggregating 2,318,654 MT) during the same period last year, a decline of 19 per cent.
"The inflow of cement from UAE coupled with price competition in the northern market in Oman, as well as the demand recession and competition in the export segment, have impacted the volume of sales and revenue during the period," Mohammed bin Alawi stated.
Price sensitivities would continue to be a factor during the rest of the year, the Chairman noted.
"Oman has witnessed a growth in public expenditure during the year as well as in domestic demand. While growth also is envisaged in the areas of infrastructure, tourism and residential projects, the supply of cement from UAE at an unviable price in the longer term is expected to continue during the year, exerting a pressure both on the volume and price of the product.
It is expected that even with some positive global and regional developments during the year, the impact of the price sensitivities would continue to exist affecting the average price realisation for the product as well as the volume of sales," he said.
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