A cable of profits
Oman Cables Industry is the company to watch out for in the near to medium term – its 266 per cent net profit growth is phenomenal


In just two years, Oman Cables has moved up six positions from 14th in 2003 to eighth in 2006. This year, the company further improved its performance to occupy the fifth place. In the process, it has disturbed many an applecart.

The year that was
The company’s stupendous performance in 2006 has been, indeed, unique and it owes its success to the strong foundation laid by the founders, Mustafa Bin Mukhtar Ali Al Lawati, the Chairman and Hussain Bin Salman Al Lawati, Vice-Chairman and Managing Director, in 1984 backed by the management’s tenacious efforts, in the face of endless impediments along the way.

The massive investments in capacity expansion initiated in early 2005 were successfully completed as originally planned and have resulted in high production, record market share and sales revenue in 2006.

Total sales reached RO125.71 million, compared to RO60.58 million in 2005, a growth of 107 per cent. Net profit was up by 266 per cent to RO9.53 million from RO2.60 million in 2005. The return on the capital, as on December 31, 2006 (prior to the increase of share capital), was 319 per cent.

In the backdrop of achieving record sales of RO85.203 million in the first nine months of 2006, the Board of Directors recognised the need to reconsider and restructure the capital reflecting the revised increasing needs of OCI’s ongoing and growing operations. A resolution was passed at the Extra Ordinary General Meeting (EOGM) on December 2, 2006, to increase the paid-up capital by distributing the ploughed back profits in the company by offering two bonus shares of RO1 par value for every one ordinary equity share of RO1 – a mid-term dividend of 200 per cent. This was yet another unique initiative in the Omani capital market.

On January 25, 2007, the Board of Directors again reviewed the cash dividend to be paid to its shareholders and the possibility to distribute further 10 per cent besides two bonus shares already paid as dividend, subject to the approval of AGM. The EOGM also approved of recasting shares from RO1 per share into 100 Bz per share. The decision was taken keeping in view the increasing value of OCI’s shares at the Muscat Secur ities Market (MSM). This has helped in easy day-to-day mobility of shares at the MSM. The market value of OCI’s new 100-Bz equity shares was in the range of RO1 to RO1.090 during December 2006. During 2006, OCI shares formed one of the important constituents of the MSM share index.

During the year, OCI made a significant presence in the growing oil and gas segment. It also achieved significant share of utilities consumption of power cables in the GCC and European markets and has been able to establish credible interface with international EPC majors that are executing large infrastructure projects in GCC, North Africa and other international locations.

Another milestone during the year was that OCI completed a expansion project, including backward integration for PVC compounding, OCI has already started implementing yet another substantial expansion project, including creation of infrastructure for future growth, by making an investment in excess of US$20 million.

The year ahead
Oman Cables chairman Mustafa Bin Muktar Bin Ali Al Lawati, while continuing to look for further growth in the coming years, had a word of caution for shareholders: The growth rate in revenue terms in the near future may be highly dependent on movement of highly unpredictable prices of metals – particularly copper – the main cost element in cable manufacturing. Apart from putting profits under pressure, it also stretches the working capital requirements to higher levels.

OCI is primarily in to manufacturing low, medium and high voltage power cables and overhead line conductors. A significant portion of cables is used for power transmission and distribution in GCC, where the company sees immense opportunities. Rapid industrialisation at Sohar and heightened activity in tourism and real estate sectors in the Sultanate of Oman will continue to boost the demand for power cables. Same is the case in other GCC countries such as UAE and KSA that are investing multi-billion US dollars in developing the power and water infrastructure. OCI, with its own network offices in UAE, Qatar and Kuwait, is well placed to cash in on these opportunities. OCI has also selectively entered global markets in Europe, UK, North Africa and the Pacific Rim countries, aiming at increasing sales and long-term profitability. Notwithstanding the buoyant demand, the increased capacities both by existing manufacturers as well as by new players will continue to put pressure on market prices.

The global power cable market would continue to grow, albeit at a lower rate in 2007. Developing economies such as China and India would continue to register a stronger growth. OCI, with its footprint in India, will have its share in this growing market. GCC markets with their huge investments in infrastructure would continue to grow with resultant demand for power cables. However, increased supplies from regional and global cable manufacturers would continue to put pressure on realisations. OCI’s recent investments in state-of-the-art technologies as well as backward integration would provide it with the competitive edge in serving global markets. OCI had a historic year in 2006 with a 107 per cent growth in sales turnover and a 266 per cent increase in net profit. The company is yet again on the threshold of its next stage of sustained growth and profitability.

OCI gives great importance to maintain. With that in mind detailed activities and procedures have been laid down, which management believes will also bring in better productivity as also healthy work atmosphere. Oman Cables established a separate HSE department two years ago to give thrust to Health, Safety and Environment, yet OCI has become a proud example for HSE amongst the industries in Rusayl Industrial Estate. The company has been recognized for its HSE performance by the Ministry of Environment. The AGM in 2006 approved to distribute RO.50,000 for the different needs of the Omani society besides other contributions for diverse humanitarian activities. OCI has donated RO.20,000 to the Ministry of Health, for use of the needy patients, who require expensive and special treatments.

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