Egypt’s largest listed cement company, Suez Cement, said demand for cement rose in the first half, but analysts say growth will slow due to higher electricity prices and a government sales tax hike.
Suez, a subsidiary of Italcementi, posted an unconsolidated first-half net profit of LE 766 million ($134 million) — unchanged from last year — and said consumption rose by 6.6 percent, down from last year’s 25-percent jump.
Other estimates for cement demand are up to 7.6 percent.
Government stimulus spending on infrastructure and growing demand for housing helped fuel demand for cement last year, but new policies, including a 5 percent sales tax and a rise in electricity costs, could crimp demand.
"If you measure it against last year, of course it is slowing down," Omar Taha, an analyst at Beltone Financial said. "It would be hard to match the growth we had last year on any front."
CI Capital said government policy, which aims to wean energy intensive industries off generous subsidies that have drained the public purse, is the biggest factor shaping the sector this year.
A new energy pricing framework could cut government spending and increase the cost of electricity by 50 percent during peak periods of usage, a research note from CI said.
Rising electricity costs push up cement prices. Rising steel prices are also set to weigh on new construction.
"The pent-up demand that was present in 2009, is not present in 2010. The prices of building materials are not as low anymore," Beltone’s Taha said.
Suez Cement’s unaudited net sales rose 4.8 percent to LE 3.4 billion in the first half.
The firm reported a 2.3 percent rise in consolidated net sales to 1.67 billion in the first quarter,
The figures include all companies in the Suez group, including Helwan Cement and Torah Portland Cement.
