Middle East Cement Update - Sample Issue

In This Issue:

  • Yemen's Cement Industry


  • Review of JCFC's Operations


  • Top Cement Firms in the Arab World


  • Israeli Imports of Jordanian Cement


  • And much more…


Cover Story

* Yemen

Status of the Cement Industry


Since its establishment in 1973, Yemen's cement industry has received favourable support from the state. Yemen's government has always obtained the necessary loans to finance this public sector industry, which consists of three main factories.

The government initially obtained a loan from former-Soviet Union in order to finance the day-to-day operations of the first and second production lines of the Bajil Cement Factory (which has an annual production capacity of 250,000 tonnes). Later, Japan granted the Yemeni government a second loan of $40 million, at a 7.5 percent annual interest rate. Funds from this loan were injected to finance part of the investment required to run Yemen's second plant, the Amran Cement Factory. Production at Amran commenced in 1982, at an annual capacity of 500,000 tonnes.

Yemen's third cement factory, Al-Burg, was also financed through a Japanese loan, valued at 22,080 billion Yen and granted at an annual interest rate of 1.5 percent. Al-Burg's annual production capacity is estimated at 500,000 tonnes. The factory's production commenced in 1993.

Thus, based on initial estimates, the annual capacity of Yemen's cement industry stands at 1,250,000 tonnes, which satisfies no more than 70 percent of the local demand.

Table (1) below shows that upon comparing the value-added revenues from cement manufacturing in Yemen with that of similar products, the former's profitability is higher. This is due to the fact that most raw materials used in the cement production process are available in abundant quantities domestically.

Table 1. Yemen's Cement Production & Revenues, 1990-1997


Year Quantity Produced (tonnes) Total Value of Revenues
(in YR)
1990 835,054 778,818,453
1991 844,812 921,116,570
1992 814,406 1,327,506,588
1993 1,083,735 1,991,809,118
1994 914,952 2,370,388,582
1995 1,104,868 4,592,626,599
1996 1,020,282 5,842,890,810
1997 1,235,790 10,842,890,810


Furthermore, the "Cement Public Corporation" has contributed to financing the state's budget, thereby alleviating Yemen's balance of payments burden. In fact, cement production is the fourth largest contributor to Yemen's domestic currency revenues.

Since cement is available locally, Yemen has no need to import the product, which helps abate the state's trade deficit. Taking into consideration the annual quantities produced between 1990-1997, based on an average market price of $60 per tonne of imported cement, the estimated savings to Yemen's trade balance are shown in table (2):

Table 2. Yemen's Cement Production & Revenues, 1990-1997


Year Savings from non-import's (in $)
1990 50,103,240
1991 50,808,720
1992 48,846,420
1993 65,025,180
1994 54,897,120
1995 65,318,280
1996 62,479,260
1997 73,747,560


The above-mentioned figures may appear negligible in Western terms, but these savings are significant in Yemen, the poorest Arab State. (Note that Yemen's monthly per capita expenditure is estimated at $32 in urban areas and under $24 in rural areas, yielding a national average of below $26. This amounts less than $1 per day.)

There have been, however, several obstacles that appear to have restricted the possibility of the Cement Public Corporation's expansion of production capacity. The following were among the company's main impediments:

  1. Non-implementation of expansion projects in the activities of all three industrial establishments, although these schemes were officially approved in both the "Third Five-Year Plan 1987-1991" and the "First Five Year Plan 1996-2000". The projects' endorsement came once all necessary geological, economic and technical studies had been processed. However, the scarcity of financial resources - either local or foreign - has been the main factor behind the projects' non-execution.



  2. The "Corporation" established several contacts with interested concerns, and inquired about their readiness to invest in Yemen's cement sector. Thus far, these talks have not materialized into any concrete deals. The government hopes that within its scheme to encourage local private sector investment, the "Corporation" will be able to implement some of its expansion projects.


  3. There is little doubt that cement manufacturing has played a vital role in the economic and social development of Yemen. Yet, in order to become an efficient sector, cement manufacturing is still in need of supervision and administration by highly qualified professionals and administrators.
    The "Corporation" has set for itself the following future goals:
  4. Increasing the actual quantities of cement production by more than the amounts decided upon by working-plans.


  5. Reducing production costs to the lowest possible levels.


  6. Increasing the quantity of cement available to local dealers, which would enable them to compete more effectively with imported cement.


  7. Developing self-sufficient sources that can be relied upon to obtain the required amounts of energy to run its three factories, without interrupting the production process.


(For more details on Yemen's cement sector, see Middle East Cement Update, January 1999 edition).

Regional News

* Jordan

JCFC Sums Up 1998 and Looks Ahead

As a result of a huge decline in exports, the net pre-tax profit of the Jordan Cement Factories Company Ltd. (JCFC) fell from JD12.3 million in 1997 to JD9.1 million in 1998. This reduction in exports has forced the company to cut its cement production by 18.5 percent, or 600,000 tonnes, to 2.65 million tonnes, and to curtail clinker output by 20 percent, or 613,000 tonnes, to 2.44 million.

Board Chairman Hamdi Tabbaa recently told shareholders that indigenous sales remained steady at approximately 2.25 million tonnes last year, but exports declined by 41 percent, from 974,000 tonnes in 1997 to 402,000 tonnes in 1998. Tabbaa disclosed that a deal involving 190,000 tonnes of cement had been negotiated with Syria, but due to falling demand in that country, the transaction was not executed. According to Tabbaa, deteriorating conditions in Syria, the largest market for Jordanian cement exports in recent years, was the primary reason for declining exports. In addition, exports to Southeast Asian were aborted. These states, which for many years had been net importers of cement, now export the commodity and thus maintain cement surpluses.

The Chairman, however, was not entirely pessimistic, as he indicated that exports to the Palestinian markets had risen once barriers that had hindered sales to the territories of the Palestinian National Authority (PNA) were eliminated. Tabbaa blamed Israeli government policy for creating these past trade impediments. He stated that exports to these territories amounted to 239,000 tonnes last year. Exports continued to the traditional Red Sea markets, but at lower levels than in 1997. Most of the company's exports were in bulk quantities and passed through the Aqaba terminal. Last year, demand for bulk cement exceeded that of packaged cement.

According to JCFC General Manager Taleb Rifai, the Palestinian market was stable during the first quarter of this year, compared to the corresponding period last year. The company hopes that exports to the PNA territories will reach 450,000 tonnes this year.

Rifai was upbeat, as he told the general assembly of shareholders that local sales and exports increased by 6.6 percent and 12.3 percent respectively during the first quarter of this year, compared to the same period in 1998. The 1999 projected budget forecasts a JD22.7 million gross profit and a net profit of JD13.2 million, based on projected production costs of JD80.2 million.

During the shareholders' meeting, both executives expressed high hopes that Lafarge, the company's new French partner, would enhance the firm's operations by reducing production costs, modernizing the industry and marketing Jordanian cement abroad. According to Rifai, the technical cooperation agreement signed with Lafarge would boost the production capacompetitive advantage of the firm.

JCFC's annual report revealed that the company's assets totaled JD176.6 million at the end of last year, compared to JD182.4 million at the end of 1997. Current assets amounted to JD48.0 million, versus JD46.5 million in 1997.

The general assembly concluded its meeting by approving the distribution of JD6.1 million in dividends to shareholders, at a rate of 10 percent. (JD1=$1.4)

* Morocco

Recent Market Developments

Ciments Francais, an Italcementi International Trading subsidiary, has a acquired 37.4 percent stake in Societe Des Ciments De Marrakech (Asmar), held by Societe' Nationale d'Investissement in Morocco. Thus, Ciments Francais, which already controlled, directly or indirectly, 22.2 percent of Asmar's stock, has now become the company's majority shareholder. In Morocco, the French Group controls 53.2 percent of Ciments du Maroc, the Casablanca-quoted firm, which manages Agadir and Safi Cement Works, and which produces pre-mixed powdered cement.

Meanwhile, by the end of March 1999, cement sales had reached 1.4 million tonnes, compared to 1.6 million tonnes during the same period last year. Sales volumes declined by 9 percent this month, following a slight rise of 0.7 percent during February 1999. Nevertheless, a 5 percent growth in sales is still projected for this year, compared to a drop of 0.4 percent in 1998.

* Saudi Arabia

Profits of Yanbu Cement Company

The profits of Yanbu Cement Company totaled SR 167 million in 1998, compared to SR 154 million in the previous year. These figures translate into an 8.4 percent rise. The company's internal financial reports show that the firm's distribution and sales expenditures increased from SR 4.7 million to SR 5.3 million during the same period.

The company's general and administrative expenses also grew from SR 6.4 million to SR 7.1 million. The firm's total capital now stands at SR 1.050 billion, which is divided into 21 million shares with a book value of SR 50 per share. (SR3.75=$1).

* Middle East

Top Cement Firms


In a recently published survey about the top Arab 100 firms, based on market capitalization, a total of eleven cement companies appeared. According to this report, the Egyptian Suez Cement is the leading Arab firm in this sector. The following table presents the ranking and other indicators of these companies.

Arab Cement Companies by Market Capitalization
(millions of US$)


Ranking Company Country Mkt. Cap. 30/6/1998 Growth (%) 97-98
31/12/97 30/6/98        
37 37 Suez Cement Egypt 907,541 -10.022
51 42 Lafarge Ciment Morocco 813,537 19.333
35 46 Southern Cement Saudi Arabia 785,047 -22.652
30 48 Saudi Cement Saudi Arabia 740,828 -36.449
40 57 Yamama Cement Saudi Arabia 636,849 -30.809
83 63 Ciments du Maroc Morocco 524,517 50.493
49 65 Yanbu Cement Saudi Arabia 515,888 -27.843
54 78 Eastern Cement Saudi Arabia 449,519 -31.316
73 90 National Cement Egypt 386,036 -17.359
75 95 Kuwait Cement Co. Kuwait 363,932 -19.55
72 98 Amerya Cement Egypt 351,476 -24.947


* Saudi Arabia

Cement Tax Reduction


In a bid to give the sector a lift, Saudi cement taxes were slashed by 50 percent. A construction slowdown in the Kingdom has left cement producers with a 6-8 million tonne surplus. Demand is projected to reach roughly 14 million tonnes this year. The government was compelled to undertake this measure after cement prices fell by close to 40 percent.

* Oman

Companies Distribute Dividends


Oman's two local cement producers recently announced their dividends for 1998. Last year, Oman Cement Company (OCC) achieved revenues of OR19,859,517, compared to OR23,944,420 in 1997. In 1998, its net profits amounted to OR5,275,497 versus OR7,087,479 the previous year. The decline in profits was a result of increased competition among cement producers in the Gulf region. OCC has decided to distribute a 17 percent dividend to its shareholders. During 1998, OCC's output totaled 911,941 tonnes, while sales reached 897,861 tonnes. Last year, OCC used 867,556 tonnes of clinker (of which 220,579 tonnes were imported) in its production process. (OR1=$2.6).

Meanwhile, the general assembly of the Raysut Cement Company (RCC) has decided to distribute 20 percent of its capital to shareholders. Toward the end of last year, the firm's second production line became operational, thus raising its production capacity of high-quality and unique brands of cement to 50,000 tonnes per year. As a result of this production expansion, management has crystallized a new export strategy, which will focus on nearby markets. Senior officials at Raysut Cement believe that the proximity of its facilities to Salalah port will enable the company to achieve significant export volumes. As part of RCC's efforts to penetrate international markets, it received the ISO 9002 certificate in 1997. Furthermore, it has also obtained the API certificate, which deals with cement for oil wells. In the past, the company had succeeded in exporting its produce to Yemen, Somalia, Sri Lanka, Madagascar, Mauritius and Seychelles.

* Egypt

Alexandria Cement's Expansion on Hold


Mrs. Nadia Makram Ubeid, the Egyptian Minister for Environmental Affairs, has decided to file a lawsuit against the Alexandria Cement Company and to suspend its expansion project until the company improves its adherence to environmental regulations. This decision came following the Minister's sudden inspection of Alexandria Cement's production facilities.

According to the ministry experts, Alexandria's production endangers the health of residents in surrounding neighborhoods. The quantity of dust created during the production process was found to be above permitted levels. Upon request of the company's management, the Minister has decided to extend Alexandria a grace period of two months to improve its production facilities.

* Israel

Imports of Jordanian Cement Permitted


The Jordan Cement Factories Company Ltd. (JCFC) will be permitted to export cement to Israel free of custom duties and inspections by the Israeli Standards Association (ISA). According to sources within the ISA, following in-depth examinations, it was determined that Jordanian cement meets Israeli specifications.

* Qatar

QNCC Capital Raised


The general assembly of Qatar National Cement Company (QNCC) has raised its capital from QR65,007,200 to QR81,259,000. The new capital is divided into a total of 8,125,900 shares (each worth QR10). During its recent April 20 meeting, the assembly approved the distribution of 30 percent of its paid-up capital as dividends to shareholders (compared to 25 percent in 1997), in addition to granting a free share for each existing four shares.

In 1998, QNCC's net profits amounted to QR86 million, versus QR68 million in 1997. Shareholders' equity reached QR550 million last year, compared to QR485 million the previous year.

During 1998, production at QNCC's two plants amounted to 853,000 tonnes, compared to 584,000 tonnes in 1997. Meanwhile, gypsum output fell from 19,000 tonnes in 1997 to 18,000 tonnes in 1998. In addition, last year QNCC's cement sales exceeded 822,000 tonnes, versus 567,000 tonnes in 1997. QNCC's gypsum sales climbed from 18,500 tonnes in 1997 to 19,500 tonnes in 1998. QNCC's total revenues from sales totaled QR168 million last year, compared to QR126 million the previous year.

As part of its 1999 plan, QNCC's board of directors has allocated QR38 million for capital expenditures, which would mainly be used for modernization and expansion projects.

* Israel

Summary of Cement Deliveries


The following table represents cement deliveries in Israel between 1980-1998.

Cement Deliveries, 1980-1999 (1,000 tonnes)

    Local Production

Imports
 
  Year  Cement delivery   Total of which: imported clinker   By Nesher   Private % of imports from total deliveries
1980 2,304.1 2,064.6 188.9 158.4 81.1 10
1981 2,514.6 2,452.2 474.6 8.0 54.4 2
1982 2,356.8 2,286.2 243.5 8.8 61.8 3
1983 2,346.4 2,224.3 73.6 14.9 107.2 5
1984 2,153.3 2,087.3 17.4 - 66.0 3
1985 2,058.5 2,020.0 - - 38.5 2
1986 2,0.3 2,05.7 - - 37.6 2
1987 2,367.5 2,306.9 112.6 - 60.6 3
1988 2,361.6 2,325.6 151.8 - 36.0 2
1989 2,309.5 2,309.5 33.7 - - -
1990 2,879.5 2,850.6 323.2 28.9 - -
1991 3,903.5 3,387.0 702.0 481.0 35.5 13
1992 4,391.1 3,958.0 1,218.0 379.0 54.1 10
1993 4,667.5 4,494.0 1,362.1 104.6 68.9 4
1994 (1) 5,051.4 4,678.0 1,536.0 275.0 98.4 7
1995 6,263 5,686.0 2,028.0 281.0 296.5 9
1996 (2) 5,651.9 5,440.0 1,395.0 n/a 211.9 4
1997 - 5,484.0 1,387.0 n/a 34.6 1
1998 5,087.0 5,024.0 685.0 n/a 63.0 1
1999 (Q1) 1,139.4 1,131.0 100.0 n/a 8.4 1


  1. Since October 1994, the figures do not include deliveries to Gaza Strip, which accounted for 7 percent of total deliveries in the previous two years.


  2. Since 1996, data does not include deliveries to Palestinian market.




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