Higher energy costs likely to hurt: Oman Cement

Conrad Prabhu -

MUSCAT, FEB 21 -

Majority government-owned Oman Cement Company has warned that higher natural gas and electricity costs have the potential to impact its bottom-line going forward.

However, company CEO Jamal Shamis al Hooti pledged greater efforts to improve cost management and productivity to help offset these impacts.

The price of natural gas for large industrial consumers was doubled with effect from January 1, 2015, with incremental increases taking effect every year thereafter — a trend, the CEO said, is “bound to have a major impact on our performance compared to the pre-increase period”.

Likewise, the sharp increase in electricity tariffs that came into effect from the start of this year for large industrial and commercial customers, is also a “major challenge” alongside the cost of other unspecified elements, Al Hooti stated in the Management Discussions & Analysis Report for 2016.

Dumping by cement producers from the neighbouring region is also a continuing challenge that the Rusayl-based company is looking to address, the CEO noted.

“The oversupply situation created by the inflow of large quantities of cement from neighbouring countries at lower prices continues to remain a threat and has created a strain on selling prices and market share of the company. (Oman Cement) is committed to meeting these challenges by adopting a strategy of dynamic pricing and effective measures of cost control and achieving higher capacity utilization,” he stated.

Oman Cement is now banking of the imminent launch of a new cement mill to grow its market share. The 150-tonnes per hour (TPH) capacity mill, when operational, will boost the plant’s combined capacity to 3.6 million tonnes of cement per annum, up from 2.74 million tonnes presently. Construction work on the new mill, along with associated silos and bulk dispatch equipment, has been completed.

“While the demand for cement is expected to remain good in the near future, (Oman Cement) will make efforts to increase its market share with the availability of higher quantities of cement from the new cement mill which has already been commissioned,” Al Hooti added.

Oman Cement posted a 10 per cent increase in its net profit after tax, which climbed to RO 12.876 million in 2016, up from RO 11.703 million a year earlier. The government’s 51 per cent share in the company is administered by Oman Investment Fund (OIF), a sovereign wealth fund of the Sultanate.