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Arabian Cement to repay US dollar loans to avoid high cost  - Daily News Egypt

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Arabian Cement to repay US dollar loans to avoid high cost 

The company aims to shrink loans to EGP 40m compared to $65m in 2016

The Arabian Cement Company plans to accelerate the repayment of US dollar loans owed to banks during the current year in order to decrease the total value of debts to EGP 40m, compared to $65m in 2016.

An official at the Arabian Cement Company told Daily News Egypt on condition of anonymity that the company made the decision to avoid the high cost of dollar debts after the Egyptian pound’s floatation in November, which increased the dollar price from EGP 8.88 to more than EGP 19.

The source added that the loans in US dollars are a crisis for all companies operating in the Egyptian market, including the cement sector, due to decreased exports to regional markets such as Libya, Syria, and Yemen as a result of the security situation.

The company received loans in dollars from the National Bank of Egypt, and used them to change work systems in its factory from natural gas and fuel oil to coal.

The source explained that the company will try to increase its sales in the domestic market through marketing and penetrating new distribution places.

He said that the domestic market controls the largest share of the company’s sales, while the company exported very small amounts to Yemen.

The results of the work for the first nine months of this year have shown that the company achieved a net profit of EGP 157.6m, compared to EGP 246.1m in the same period last year—a decrease by 36%.

The source pointed out that the company spent EGP 80m to add a new coal mill in order to increase the amount of burning coal, agricultural, and industrial waste to be used in the plant furnaces, and to raise the operation capacity.

The new coal mill project comes as part of three projects that the company intends to implement with a total of €7m to establish a mechanical crane instead of an air crane that consumes a lot of electricity.

The plan also includes the establishment of a new technical system for the cement mills to preserve the cement specifications.

The company did not implement its plan to establish a cement grinding plant in Brazil with a capacity of 230,000 tonnes annually due to lack of investment feasibility of the project, given the adverse conditions experienced by the Brazilian economy.

The source mentioned that the production capacity of the factory approached 80% of its production capacity during 2016. The company will try to increase it to 100% in 2017, after completing the investments required to convert the factories to work with coal and alternative fuels.

The source confirmed that the company is interested in any promising investment opportunities associated with the cement industry in the Egyptian market.

Cement companies have suffered after the 25 January Revolution from the recurrence of natural gas and fuel oil supply necessary to run factory ovens, which fronted the government in 2013 to approve the use of coal in the production for cement companies.

According to official reports, the production capacity of existing cement plants amounts to 70m tonnes, while the volume of cement sold in 2016 amounted to about EGP 57m. The majority of companies resorted to reduce production capacity.

Beltone Financial has raised the fair value of the shares of the Arabian Cement Company to EGP 12.6 instead of EGP 9.1 per share.

Beltone confirmed that the supply in the Egyptian cement sector is no longer an obstacle after the government’s announcement to grant the Industrial Development Authority three cement licences on 30 November 2016, which will add a total of 6m tonnes per year to the production capacity of the market from 2020 to 2022.

Beltone predicted a decline in cement prices with the disappearance of the supply obstacle in the medium-term, due to the increased consumption levels.

The Arabian Cement Company was founded in 1997 by a group of Egyptian businesspeople, with a capital of EGP 757.5m, divided into 378.7m shares, with a nominal value of EGP 2  per share. The Spanish Cementos La Union is considered the owner of the majority stake.

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