Unprofitable Cement Producers in Belarus, Despite Sales Spike
Improved sales and reduced losses indicate a positive trend for Belarusian cement industry, suggesting it's not faltering significantly.
Despite an impressive 18.3% surge in revenue for OAO "Belarusian Cement Plant" and a 12.5% increase for "Krichevcementoshifer", both companies saw their net losses rise in 2024. OAO "Krasnoselskstroyaterials", however, managed to decrease its net loss while increasing revenue by 20.9%. The combined accumulated uncovered loss for the three enterprises reached a staggering 1,084.9 million rubles.
An In-depth Look at Factors Affecting Profitability
Although the specific reasons for the unprofitability are not entirely clear, several factors may have contributed to the situation. First and foremost, the global cement market suffered a 12.1% decline in value to $217.2B in 2024, mainly due to oversupply and reduced demand[4]. Belarusian producers increased production by 7% and sales by 6.5%, but the global price drop likely squeezed their margins.
Another factor impacting profitability is the export-dependent nature of Belarus's cement industry. The country exports a substantial portion of its cement to Russia, making it susceptible to price fluctuations and logistical costs in export markets[1]. Currency risks and trade barriers in target markets could further strain profitability.
Another challenge comes from the government's emphasis on large-scale construction projects to boost economic appearances, which may force producers to accept lower-margin contracts or state-imposed pricing[3]. To maintain market share, increased capital expenditures for production line upgrades are planned, which could temporarily reduce profitability[1].
Competitive Landscape
The dominance of Belarusian Cement's three plants, accounting for 86.5% of domestic sales, provides operational leverage but risks inflexible cost structures that could worsen during downturns[1]. On a global scale, China's cement production dropped, while India and Turkey showed modest growth. The rapid expansion of Belarus's production may risk oversupply[1][4].
Potential Risks and Implications
Plans to increase market share through modernization might lead to overcapacity if not matched with demand growth[1]. Energy costs, although not directly cited for Belarus, could pose a problem in the event of a rebound or increased logistics costs. Geopolitical factors, such as relying on Russian markets and potential labor shortages, add operational uncertainties[3].
The lack of explicit profit/loss data for Belarusian cement firms in 2024 necessitates caution, but the interplay of rising production, falling global prices, and export concentration makes clear profitability risks.
- Although OAO "Belarusian Cement Plant" and "Krichevcementoshifer" experienced revenue growth in 2024, their net losses also rose, indicating potential issues within the belarusian cement industry.
- The global decline in cement market value, coupled with export-dependent nature of belarus's cement industry, could have squeezed the margins of domestic cement producers and contributed to their unprofitability.
- The need for modernization to maintain market share and increase production line efficiency, as well as geopolitical factors such as relying on Russian markets and potential labor shortages, pose operational uncertainties for OAO and other belarusian cement businesses.
- The dominance of OAO, Krichevcementoshifer, and other major belarusian cement producers in the domestic market may risk inflexible cost structures and overcapacity, particularly if not matched with demand growth.
