Tokyo Cement reports solid 2Q performance

• Sales and profits jump on strong demand as construction rebounds

Tokyo Cement Company (Lanka) PLC reported higher revenues and profits for the three months ended in September (2Q21), as the quick rebound in the country’s construction sector shortly after the easing of lockdowns helped the company to recoup the lost sales during the previous quarter. 

Sri Lanka’s largest locally-owned cement manufacturer and the market leader in ready-mix concrete reported earnings of Rs.5.28 a share or Rs.2.12 billion for the July- September quarter, on revenues of Rs.11.4 billion. 
Both profits and revenues were up 163 percent and 13 percent, respectively, from the comparable period in 2019.
With the September sales jump, the company’s six-month revenues were Rs.19.1 billion, identical to the same period in 2019.  

Cement sales are a proxy for the country’s construction sector’s health and hence, Tokyo Cement’s strong top line is a valid indication of the reinvigorated construction activities in the housing, industrial and infrastructure segments. 

The sector is also one of the largest employers in the country. 

Meanwhile, the latest data available through August showed the local cement production, which recovered in June after the temporary setback caused by the pandemic, has logged a 17.4 percent jump in August to 392,000 metric tonnes, compared to 334,000 metric tonnes in the same month in 2019. 

The cumulative cement production from January through August has increased by 6 percent to 2,448,000 metric tonnes, compared to 2,310,000 metric tonnes in the same period, last year. 

However, the total cement used in construction during the eight months declined by 18.3 percent to 4,691,000 metric tonnes, since cement imports slumped, as a result of the cess imposed on both bag and bulk cement imports, to support the local producers. 

The cess resulted in a Rs.54 increase in a 50kg bag of imported cement and a Rs.47 increase in 50kg of imported bulk cement. 

Despite some slowdown in the real estate segment in the short term, Tokyo Cement expects the Port City construction, national road development projects and other infrastructure development projects to power the demand for cement. 

However, the company cited the payment delays by the government could slowdown the construction sector recovery, as in certain cases the government takes as long as 18 months to settle bills, causing cash squeeze in the industry. 

The government in July issued letters of acceptance of payments on outstanding bills to contractors, to settle outstanding bills. 

Meanwhile, the company’s cash balance jumped from Rs.430 million on March 31, 2020, to Rs.1.8 billion by September 30, 2020. The company has trade receivables of Rs.5.1 billion, largely unchanged during the last six months. 

The company settled Rs.2.5 billion of loans during the six months. 

St. Anthony’s Consolidated (Pvt.) Ltd had a 27.5 percent stake in Tokyo Cement and South Asian Investment (Pvt.) Ltd held another 20.1 percent while Ube Singapore Holdings Pte. Ltd, the joint venture partner of the company, had a 10 percent stake by end-September.