Displaying items by tag: GCW294

Given the low oil price the economies of the Gulf Cooperation Countries (GCC) (including the UAE) have taken a knock in recent years. So, the news this week that Arkan has closed its Emirates Cement plant in Al Ain for good may not be too surprising. The building materials producer opened its whopping 5.7Mt/yr Al Ain Cement plant in late 2014 and, now that rising energy costs have become too much of a burden it appears to have shut down the older plant for good and moved the production across. Now it says the new unit is operating at nearly full capacity.

Arkan’s cement business saw its revenue fall by 9% year-on-year to US$220m in 2016 from US$239m in 2015. Net profit fell more sharply, by 25% to US$20.6m. The chairman cited a ‘harsh current market cycle’ as the cause of his company’s woes and also blamed a heavy rainstorm in March 2016. The storm caused an interruption in production due to a damaged conveyor belt at its Al Ain Cement plant that stalled the production on half of its raw material handling line. The producer turbocharged its sales and profits in 2014 with the opening of the new plant and managing to continue the growth in 2015 but it slowed down in 2016. Arkan has also been in the alternative fuels news this week with the announcement of plans to test burning spent pot lining. This certainly hints at a producer trying to minimise its fuel spend.

Other local producers have had similar experiences. Fujairah Cement reported that its revenue fell by 2.5% to US$162m from US$167m although it did manage to grow its profit by 12% to US$15.4m. Earlier in the year it attributed the rise in profits to higher prices and cost control on the production side. The producer, a subsidiary of India’s JK Cement, operates a dual Ordinary Portland Cement and White Cement plant. Union Cement’s revenue fell by 10% to US$153m from US$170m and its profit fell by 19% to US$22.9m from US$28.2m.

A report by Deloitte on the construction market in Dubai published in early 2016 showed that the UAE became a net exporter of cement in 2010. Local producers exported 3Mt of cement in 2012 and this was aided by high energy cost subsidies. Prior to this the nation had been importing large amounts of cement and building up its local production capacity to meet its voracious real estate market. However, this previously caused problems in 2007 when the real estate market crashed. More recently the Dubai Chamber reported that the potential value of construction projects awarded in 2016 was US$36.5bn. Overall in the GCC the value of contracts fell by 17% year-on-year. Locally, the Dubai construction sector’s real added value, or its contribution to the national gross domestic product, fell in 2012 before rising slowly subsequently but its growth rate picked up in 2013 and then started to slow down.

Looking at the broader economy the World Bank reckoned in the autumn of 2016 that growth in the UAE was predicted to continue slowing in 2016 before picking up in 2018 due to rising oil prices. In the midst of uncertain times a report by the Dubai Chamber called for cement producers to improve their competitiveness, save on production costs, use more alternative fuels and push exports. To this end Arkan’s trial with spent pot lining and today’s news of a technology start-up promoting a fly ash and slag cement for 3D printing suggest a cement and construction industry marking time before growth returns.

South Africa: AfriSam is preparing to replace its chief executive officer (CEO) to aid its merger discussions with PPC. Rob Wessels, a former chief investment officer at AfriSam’s black empowerment partner Phembani Group, is set to replace current Stephan Olivier on a short-term contract, according to sources quoted by Boomberg. The personnel manoeuvring would also potentially place PPC’s current CEO Darryll Castle in a strong position to become the merged company’s new leader. PPC and AfriSam announced that they had resumed merger talks in February 2017 after a previous attempt stalled in 2015.

Kenya: Bamburi Cement has appointed three women to its board of directors. Alice Owuor, Rita Kavashe and Hellen Gichohi have been appointed to the board, according to the Business Daily newspaper. Two female directors Sheila M’Mbijjewe and Catherine Langreney, resigned from the board in 2016 leaving it with an all-male composition and no female representation.

Owuor was the former Kenya Revenue Authority Commissioner for Domestic Taxes until she retired in 2016. Kavashe has been the chief executive of General Motors East Africa since 2011 and has worked for the motor vehicle dealer for more than two decades.

Gichohi is the managing director of the Equity Bank’s social arm, the Equity Group Foundation. She joined the Equity Group Foundation in 2012 from the African Wildlife Foundation (AWF) where she served for 11 years from 2001, as the President from 2007, Vice President from 2002 and Director of the Conservation Program from 2001 when she joined AWF. She holds a PhD in Ecology from the University of Leicester in the UK, a Master of Science degree in Biology of Conservation, and a BSc in Zoology from the University of Nairobi and Kenyatta University respectively.