Cairo: Cement companies are expected to further reel in the second half of this year, suggesting more losses and shrinking profits to come down the road, according to analysts and research units.

The challenges facing cement companies include spiking costs of raw materials, input and energy together with losing competitive edge abroad to the advantage of rivals and stagnation resulting from a mounting supply side.

Profit margins of cement companies are expected to decline by 7 to 10 percent in the second half of this year, as the first half's business results were as shocking as to sound the alarm bells.

Upon surveying the business results of six cement companies in the first half of this year, the following dismal facts were revealed: Portland Cement Company (ALEX) posted EGP2.2mln losses, Sinai Cement's (SCEM) losses rose slightly to EGP155.7mln up from EGP153.2mln a year earlier.

Also, Alexandria Portland Cement posted EGP130.5mln losses up from EGP192.6mln a year earlier, profits of South Valley Cement Company (SVCE) fell by 77 percent to EGP20.6mln down from EGP89.12mln on the backdrop of sales declining to EGP480.4mln down from EGP513.3mln a year earlier.

Conversely, profits of Al-Arabia Cement Company (ARCC) soared to EGP212.7mln up from EGP71.71mln a year earlier, as revenues rose to EGP1.64bn up from EGP1.22bn a year earlier. Also, profits of Misr Beni Suef Company (MBSC) jumped by 287 percent to EGP215.6mln up from EGP55.7mln a year earlier.

" Sales of cement companies dwindled in the second quarter of this year in response to operating an Armed Forces-owned cement company, toughening competition in the Egyptian market," said cement analyst at Pharos Investment Bank Mark Adeeb. A few months ago, a new cement plant owned by Al-Arish Cement, affiliated to the Armed Forces, has become operational at USD1.1bn costs and with 13mln tonne capacity per year.

Adeeb predicted costs of manufacturing cement to hike by EGP50-70 on account of hiking prices of electricity and natural gas, suggesting margin profits to fall by 7 to 10 percent during the second half of this year.

" Cement companies that are geographically nearer to the Armed Forces-owned cement factory will be prone to more strains with the latter benefiting from cheaper costs, labor and natural gas," said analyst at Al-Naeem Investment Bank Bakinam El-Araby.

According Abu Bakr Imam, head of research division at Segma Co., the only way out for the struggling cement companies is to try mergers or acquisitions among themselves, a cheaper way for staving off the crisis.

"With the government clamping down on building violations and the mega projects meeting their cement needs from state-owned factories, cement exports are reeling from the toughening competition from Middle-Eastern and Arab producers of cement privileged with lower costs of inputs, notably Turkey, Saudi Arabia and Algeria."

Source: AlMal

SCZONE partners with Germany’s H2 Industries for $4B green hydrogen plant Updated 6/1/2022 1:18:00 PM