Raysut Cement of Oman is losing market share at home as rival UAE players offer competitive pricing. The country's largest cement maker reported a 28 per cent decline in annual profit.
Net income declined to 14.9 million rials, in line with analyst estimates, from 20.7m rials a year earlier, the company said in a filing to the Muscat Securities Market yesterday. Cost of sales increased to 61.9m rials from 41.7m rials a year earlier, the company said.
Oman is moving ahead with a series of infrastructure, airport and port developments, which many thought would mean bumper profits for Omani cement makers. But that has not been the case.
In the aftermath of the Dubai property crash of late 2008, contracts for building projects have drastically diminished, creating a surplus of materials.
Cement companies in the Emirates have looked to Oman for a market for their products, causing "severe competition" for Raysut Cement, said Ammar Salem, an analyst at Oman Arab Bank.
Mr Salem has a "neutral" rating on the stock. Raysut was up 1.3 per cent at 0.73 rials on the Muscat exchange yesterday.
Cement in Oman is about 25 rials a tonne, but UAE prices are as low as 20 rials. With transport, the cost per tonne of UAE cement is an average of 22-23 rials, Mr Salem said.
"It won't last long. They can't just dump forever," he said. "A turnaround in the Dubai construction sector, combined with exacerbated losses by some of the country's cement plants, could mean a hike in prices in the medium term."
Raysut, based in Salalah, bought Pioneer Cement Industries in Ras Al Khaimah for $172m last year. The purchase was made to add 1.7 million tonnes to Raysut's existing capacity.
"The idea was to free up capacity so they can export more to markets in Sri Lanka, Pakistan, Somalia and Yemen," Mr Salem said. "The second reason was to help reduce shipping costs. Salalah to Muscat is about 1,000 kilometres; by contrast, Ras Al Khaimah to Muscat is about 250 kilometres."