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Suez Cement sees profits drop, as chairman blames energy shortage

Net profits drop to LE363.8 mn in first nine months of 2014, down from LE425.6 mn in same period last year

Deya Abaza, Thursday 30 Oct 2014
Egypt cement
Egypt cement (Photo: Al-Ahram)
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Views: 991

Suez Cement, one of Egypt's largest cement producers, reported a 14 percent drop in net profits in the first nine months of 2014, as its chairman blamed fuel shortages for the decline.

Net profit dropped to LE363.8 million ($51.6 million) in the period ending on 30 September, down from the LE425.6 million ($59.5 million) reported in the same period of the previous year.

"Overall operations have been affected by the diminished supply of energy, meaning that we are operating at low capacity," chairman Omar Mohanna told Ahram Online.

Mohanna estimates that energy costs account for some 55 percent of production costs. Cement factories currently pay $8 per million British Thermal Units (BTUs) for energy derived from natural gas and Mazut, after a government decision to up prices from $6 per million BTUs in July.

Egypt's government has been cutting down fuel subsidies for energy-intensive industries in an effort to trim a subsidy bill that eats up a fifth of the country's annual budget.

The government has also allocated increasing quantities of natural gas to the electricity sector to battle increasingly frequent blackouts, at the expense of industries such as cement.

Fuel shortages have hindered operations across the sector, as local producers have been forced to import increasing amounts of clinker, a basic ingredient for Portland cement, to save on energy costs.

Overall, Mohanna says that local cement makers, whose output he estimates at around 52 million tonnes this year, will have imported 7 million tonnes of clinker by the end of the calendar year.

The installed capacity of Egypt's cement producers is about 68 million tonnes annually, according to Mohanna, with the possible achieved capacity at 65 million tonnes.

A subsidiary of Italcementi Group, Suez Cement is one of the largest cement producers in Egypt, with a capacity of 4 million tonnes per year.

The company's share price was down 7.10 percent at the end of trading on Egypt's stock exchange on Thursday, closing at LE36.11 ($5.05) per share.

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