Arabian Cement Company (ACC) was able to normalise its earnings before interest, taxes, depreciation, and amortisation (EBITDA) during the fourth quarter (Q4) of 2015 but stated its dues increased in the wake of the dollar crisis.
“The FC [foreign currency] shortage was highlighted in the company’s balance sheet … as suppliers’ balances and dues to the parent company surged significantly, flagging the difficulties faced in sourcing USD to pay for coal cargos and repatriate profits,” the company said.
“Even cash balances are up, as ACC sets aside the FC debt instalments due in EGP until sourcing USD becomes more accessible,” the cement company added.
The dollar shortage has been an ongoing problem for domestic and foreign investors alike. Cement producer Italcementi announced that it is planning to remove their head office from Egypt if the dollar crisis continues.
ACC described its financial results as “mixed”. The company added, however, that nothing is alarming with regards to profits, losses, and the operating performance.
During the quarter, the company’s cement selling price registered EGP497/tonne, 3% higher than ACC had previously predicted.
Revenues and profits both declined, however, compared to the previous quarter. The company reported EGP 338m in revenues, EGP 45m lower than the revenues recorded in Q3 2015 and EGP 178m lower than the revenues of Q4 2014.
The company’s profits declined to EGP 111m during Q4 2015, EGP 96m lower than the profits registered during the same quarter a year earlier. During Q3 2015, profits totalled EGP 181m.
The price of cement since February increased, rising to EGP 700/tonne and coinciding with de-stocking activities from cement producers.
“We think 1Q2016 is likely on track for a positive earnings surprise, despite FC challenges, as higher cement prices will compensate for any drop in volumes, which will reflect in a short term boost to margins,” the company said.
“However, trading wise, we believe the stock’s rally could be short-lived, as we are approaching the expiry of the lock-up period for 77.5% of the shares in May.”
The company stated that during the first quarter of the year, the cement market has been “highly volatile”.