Arkan Building Materials Co. PJSC (ADX: ARKAN) (“Arkan” or “the Group”), a leading building material industrial conglomerate announced today that it has received notification of increased energy prices to supply its factories and outlined a series of energy saving initiatives to counter the impact.
These energy efficiency measures would be in addition to cost savings, as previously announced, achieved from the sourcing of core raw materials from closer locations to its plants, thus resulting in substantial savings in excess of AED 50 million on logistics from January 2017 onwards.
Energy Prices
Abu Dhabi Distribution Company (ADDC) increased the electricity supply prices starting January 1st, 2017 from an average of 18.3 fils per KWH to 28.6 fils per KWH, and the water supply prices from 4.00 to 7.84 per cubic meter.
In addition, Abu Dhabi National Oil Company (ADNOC) notified Arkan of an increase in the price of natural gas, from 1 January 2017, by 73.3%.
Mitigation
Over the course of 2016, management continued driving operational efficiencies across all its business units with a special focus on energy efficiency measures. The Company has been able to put in place a number of programmes to mitigate against utility price rises including, for example, the implementation of Waste Heat Recovery Technology that will reduce electricity consumption from the grid at a lower rate. Hot gases collected at the Clinker Cooler will be channelled to a turbine are expected to produce enough electricity to cope with one quarter of its requirements.
Further to the efficiency measures, the management team has been working on a range of initiatives to identify cheaper energy sources and is currently running a feasibility study to build a coal-powered plant to supply electricity to its cement factory. Coal could be considered to fire the kiln in the future. Biomass and other wastes are being sought to reduce gas needed to fire the kilns.
A temporary consolidation of the production and sales of the cement in one location, at the new Al Ain Cement Factory, previously produced and distributed from the two plants, was decided by its Board of Directors during their meeting no. 09/2016 on 28th of December 2016. Savings in excess of AED 45 million are expected to be generated through this consolidation.
Eng. Jamal Salem Al Dhaheri, Arkan’s Chairman said: "We have been working continuously to drive energy and raw material costs down across our business and have implemented a range of initiatives that will mitigate to a large extent the tariff increases we face. These actions will maintain our product pricing for the benefit of our customers. In today’s extremely competitive market for clinker and cement products and other speciality building materials, our strategy will continue protecting our market share in our home market and drive growth in our export markets.”