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| Cement companies in Qatar will not be affected by the government decision to relocate quarries, find report |
Qatar’s reported moves to relocate as many as 14 quarries, owing to environmental issues, will not affect local cement companies, according to a report by Global Investment House.
The Environment Ministry’s decision to relocate quarries has prompted their owners to caution that it could “considerably” up the prices of Gabbro, a basic building raw material, due to shortages that would be created interim, the report said.
“At the end of February 2012, the Qatari government announced closure of 14 quarries due to environmental reasons,” Global said in a ‘GCC Cement Quarterly’ report.
“Global Research had discussion over this topic with one of the listed companies, which was of the view that it would not affect the local cement manufacturers,” it said.
The estimates of the demand for 2012 provided by government authorities are higher than the current demand of 3.5-4mn tonnes per annum (mta). Global estimates that the average demand in Qatar during the 2012-17 period is expected to be 4.8mta.
Highlighting that Qatar National Cement had announced that it was increasing its capacity by 0.93mta to 5.36mta owing to expectations of increase in demand in the coming years, Global said however the company had “mixed” views of either going for expansion or raising output by 10-20%.
“Both the options are under study and none of them have been finalised yet,” it said.
Cement prices in Qatar have remained mostly constant in the last couple of years, it said, adding that in 2011, the average cement prices remained around the same at $70.1 per tonne.
“We believe cement prices will remain flat in Qatar because of lesser local players and government control over prices,” Global said.
The report said Qatar witnessed a 3.6% drop in cement sector’s profitability because of a 5.2% drop in the top line in 2011. However, in the fourth quarter of 2011, the sector witnessed a 16.9% jump in profitability as they had curtailed their clinker imports, which used to cost them “heavily” in the previous quarters.
The consolidated revenues of Qatar’s cement sector fell 5.2% to $325.3mn in 2011 because of the decreased market demand caused by effects of global financial crisis and also due to the new entrant in the domestic cement sector.
However, non-core income segment continued to add to the bottom line and it was slightly higher than the contribution in the same period of 2010. Contribution during 2011 was $25.4mn (17.8% of total income) compared to $24.1mn (16.4%) in the previous year, it said.
Finding that debt levels of the sector decreased by 34.4% to $307mn in 2011, it said Qatar National Cement was able to shed off more than 50% of its debt as its expansion had come online and with the returns, they were able to pay back creditors.