Future not set in stone for Jordan Cement

What's Down: Jordan Cement suffers big losses amid increased competition and rising costs in the Kingdom.

The construction sector has been one of the biggest casualties of the property downturn, and the industry's suppliers are also feeling the impact.

Lafarge's Jordanian business is one company with direct exposure to the sector that is struggling to find business.

Jordan Cement, which is 50.3 per cent owned by Lafarge, one of the world's largest cement makers, reported 20 million Jordanian dinars worth of losses after barely breaking even in 2010. Revenues dropped to 134m dinars, a 21 per cent drop from the year earlier period.

The company, which once had a monopoly in the country, has been struggling from increased competition ever since a fourth cement factory opened in March last year, while rising costs have been eating away its revenues.

Jordan Cement manufactures, distributes and trades cement inside and outside the kingdom. It has two plants, in Al Fuheis and Al Rashadiyah, with a combined production capacity of 4.8 million tonnes a year. Production was the lowest in 11 years last year.

Jordan Cement stopped exporting the commodity to neighbouring Syria, Iraq and Sudan last year as it struggled with high fuel, electricity and transport costs. The company has been in negotiations with the government to allow the use of coal as a cheaper power alternative. One of Jordan Cement's main domestic competitors benefits from purchasing the raw material to make cement from abroad, which it buys at a lower price.

"There are talks with the government to allow us to use coal," the company's chief executive Salem Sousou told Bloomberg News in August. "If there is no progress we have no future and we cannot compete, especially as rivals are allowed to use it. This means shutting us down."

The company has "responded to problems by closing down production lines and offering retirement packages in order to decrease employees", analysts at Al Arabi Investment Group, a member of Arab Bank group, said in a note to clients.

The company's "provision expense against lawsuits increased 97 per cent to 4.2m dinars, in addition the company reported 13m in losses due to lower value of equipment and spare parts," the note added.