If you can't sell, invest. That seems to be the lesson one Northern Emirates company has learnt recently.
Profits for Umm Al Qaiwain Cement more than doubled last year, despite an almost 50 per cent drop in sales for the commodity, because of a surge in dividend payments from local equities. Net income reached Dh10.3 million (US$2.8m), compared with Dh6.2m the year earlier.
Dividends received increased to Dh15.3m, from Dh13.3m, bringing total profit from investment in shares to Dh15.5m, from Dh15.4m in 2010.
"Investment activity represents a core foundation for supporting the company's profits," the cement producer said in a regulatory filing yesterday.
Umm Al Qaiwain proposed a 7 per cent cash dividend for last year, translating to a total of Dh25.4m, subject to shareholder approval. The company's shares rose 1.1 per cent to 87 fils in early trading on the Abu Dhabi Securities Exchange General Index.
The UAE cement sector was hit hard by a slump in demand in the aftermath of the Dubai property decline of late 2008 after a fall in contracts for building projects created a surplus of materials.
Many companies tried to relieve their overflowing capacity by selling their products in Oman. Cement revenues dropped 46 per cent to Dh19.8m last year, from Dh36.8m the year earlier. Expenses declined to Dh19.3m from Dh35.7m.
The weakness in the sector for a third consecutive year "has affected the operational performance of most companies, which recorded incremental losses in its operational activities", Umm Al Qaiwain Cement said.
Meanwhile, the "cost of production has not seen any relative improvement to compensate for the collapse of sales revenue resulting from the simultaneous reduction in the quantity and sales price", it said.