Arkan closes Emirates Cement Factory, one of UAE's oldest plants

Rising power costs have forced the closure of one of the country’s oldest cement plants as subsidy reforms start to bite.

Arkan announced in December that it would take a series of measures to combat higher gas and electricity prices that were introduced on January 1 this year.

These included temporarily closing Emirates Cement Factory, which has been operating for 43 years, and accommodating production at its nearby Al Ain Cement Factory — a Dh1.3bn facility which opened in November 2014.But now the Abu Dhabi-listed producer has decided to shut down the factory permanently.

Arkan has re-stated its 2016 accounts to reflect the impact of the closure and said the move would lead to an annual cost saving of Dh45 million.

It means that its Al Ain Cement Factory is now running at almost full capacity.

The closure also means it has had to write off the value of the Emirates Cement Factory.

It had a book value of Dh1157.7m meaning that the Dh75.7m net profit it declared in its unaudited results last month will now be reversed into a Dh82m loss.

The chairman of Arkan, Jamal Al Dhaheri, said: “This one-off book loss doesn’t change the fundamentals of Arkan business and we are actively exploring ways to dispose of the plant in the near future and realise the highest value possible.”

He said that the company’s cement operation generated a revenue of Dh613m and a profit of Dh133m last year, despite the fact that the Al Ain plant was closed for four months last year after it was hit by a storm in March.

Cement production, which is an energy-intensive process, accounted for 72 per cent of Arkan’s sales in the first nine months of 2016.

In December, the company said that it was facing a 73.3 per cent rise in the price of gas used to fire its kilns.

Its total power bill was set to increase by just over 56 per cent, the company said.

Yet despite higher input costs, Mr Al Dhaheri said that the company is “looking forward to maintaining our leadership position in 2017 by being the lowest cost producer in the segment”.

“Arkan has made a good start to 2017, especially in the penetration of new markets both locally and overseas,” said Mr Al Dhaheri.

He said it has extended its footprint in Dubai where it is working on major new projects like Dubai South, and exporting more products such as glass-reinforced polymer pipes to markets in South-east Asia and Central Africa.

Arkan Building Materials is part of Abu Dhabi’s General Holding Corporation, Senaat, which was set up to help diversify the emirate’s economy.

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