Tokyo Cement Group in Sri Lanka records a turnover exceeding Rs. 16 billion - Opportunity Sri Lanka
Tokyo Cement Group in Sri Lanka records a turnover exceeding Rs. 16 billion

Tokyo Cement Group in Sri Lanka records a turnover exceeding Rs. 16 billion

The Morning: Tokyo Cement Group (Tokyo Cement) reported its financial performance for the fourth quarter ending 31 March 2022, with a turnover of Rs. 16,158 million reflecting a year-on-year (YoY) growth of 31%, compared to Rs. 12,373 million during the same period last year.
Despite turnover growth, Tokyo Cement’s sales volumes reduced by 11% compared to the fourth quarter last year, due to a plant breakdown at one of the grinding mills and unavailability of raw materials. The group recorded a Rs. 2,531 million loss for the fourth quarter, of which the largest contribution came from exchange losses that amounted to Rs. 4,822 million.

The group’s YoY performance comparison against the previous financial year reflects the impact of significant increases in cost of goods and shortages of raw materials due to US dollar illiquidity in the market. Sales volume of Tokyo Cement showed a marginal increase of 1% for the financial year, whilst turnover saw a YoY growth of 22%, from Rs. 42,962 million to Rs. 52,477 million. The group recorded a loss of Rs. 453 million for the FY 2021/22, with the exchange loss standing at Rs. 5,050 million for the year.
During the quarter, prices of all construction material spiked sharply, reflecting the highly volatile macroeconomic environment. Raw material costs increased in line with global price surges, compounded upon by increasing freight rates due to rising oil prices, and interest for longer credit periods of 180 days. In addition, constraints in establishing letters of credit (LCs) gave rise to material shortages. The price of a 50 kg bag of cement was adjusted to reflect these cost increases accordingly.
On 1 January, cement prices increased from Rs. 1,275 to Rs. 1,375, due to the increase in raw material costs and freight charges.
On 8 March, the Central Bank of Sri Lanka (CBSL) floated the currency (previously pegged to Rs. 203 to the US dollar) causing the rupee to depreciate to Rs. 230 to the US dollar, the same day.
On 12 March, the official exchange rate depreciated to Rs. 260 to the US dollar and the cement industry increased prices of a 50 kg bag of cement to Rs. 1,850.
On 1 April, the official exchange rate rose to Rs. 299 to the US dollar, resulting in the increase of a 50 kg bag of cement to Rs. 2,350.

OSL take:

The turnover recorded by Sri Lanka’s Tokyo Cement is indicative of the strength and growth of the country’s private sector. With the country’s development programme, there is a continuous demand for the construction industry, especially material required for construction like cement. The increase in economic activities have resulted in an increase in demand in the house and property sectors. Given the growing business potential in Sri Lanka and increase in economic activities, foreign businesses/investors could confidently explore the growing opportunities in Sri Lanka’s construction industry. Foreign businesses/investors could infact receive many benefits for their foreign exchange given the rate of the Sri Lankan rupee against the US dollar.

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Article Code : VBS/AT/08062022/Z_4

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