Tokyo Cement Group (Tokyo Cement) reported its results for the second quarter ended September 30, 2021, with a turnover of Rs. 11,885 million reflecting a Year-on-Year growth of 4%, compared to Rs. 11,413 million during the same period last year.
Overall, Tokyo Cement’s sales volumes have reduced by 3% compared to the second quarter last year, due to the shortages and delays in the supply chain of raw materials.The Group recorded Rs. 173 million profit before tax for the second quarter against Rs. 2,277 million for the same period last year, whilst recording a profit after tax of Rs. 132 million as against Rs. 2,104 million during the same period last year.Even though Tokyo Cement was operating at maximum capacity, a shortage in cement supply was experienced in the market during this period.
Throughout the quarter, shortages and delays in imported raw materials persisted due to intermittent operational shutdowns of supplier facilities and ports, a scarcity of vessels, and other supply chain challenges arising out of the pandemic. The fuel price increase and unavailability of vessels escalated inbound freight rates by over 300% within a very short period.
Further, considerable delays occurred in opening LCs with the banks, wherein a process that typically happened on the same day now takes several weeks.
The cost of clinker continued to increase in line with coal prices, as demand outstripped supply.
The value of the Sri Lankan rupee depreciated when compared to the same period last year, compounding upon sharp price hikes of imported raw materials including clinker and paper for bags. Due to heightened fiscal barriers, cement importers drastically cut down or completely halted importation thus resulting in a market shortage. Towards the end of the quarter a cement shortage occurred in the market due to multiple reasons beyond the control of the manufacturers.
To remedy this situation the Government decisively removed the MRP and Tokyo Cement welcomed the prudent decision which will help mitigate losses incurred by manufacturers in the current economic environment and ensure an uninterrupted supply to the market. Continuous increases in global coal and oil prices, in addition to freight costs are expected to escalate the cost of raw materials further.
To avoid a shortage in the market, Tokyo Cement intends to supplement local production with importation of finished cement until additional local production capacity comes online. The company will be laying the foundation for the new factory expansion in early November, to increase the manufacturing capacity by further 1 million Metric Tons by early 2023.
The expansion of the Tokyo Cement Colombo Terminal slated to be operational in the upcoming quarter, will increase the Company’s bulk importation, packaging, and distribution capacity to over 1 million Metric Tons.
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