Tokyo Cement 3Q results underline the Group’s positioning for a construction sector recovery, as strong volume growth lifted turnover despite margin pressure from higher costs and currency depreciation during the quarter ended December 2025.
Tokyo Cement 3Q results highlight volume growth and outlook
Tokyo Cement 3Q results point to improving momentum in Sri Lanka’s construction sector, even as profitability faced short-term pressure from cost and pricing factors. The Tokyo Cement Group reported a turnover of Rs. 14,523 million for the third quarter ended 31 December 2025, compared with Rs. 11,639 million recorded in the corresponding period a year earlier, reflecting a 25 percent year-on-year increase.
The growth in revenue was driven primarily by significant volume expansion that outperformed overall industry trends. The company said this performance validated the positive outlook projected earlier in the financial year, supported by stable pricing conditions and a gradual revival in construction activity across key segments.
Despite the strong top-line performance, profit after tax declined to Rs. 332 million from Rs. 1,006 million in the same quarter of the previous year. According to the Group, the reduction in profitability stemmed from a combination of factors, including a reduction in selling prices, rising raw material costs, and the impact of currency depreciation.
Additional pressure on earnings arose from the capitalization of recent expansion initiatives, particularly in Trincomalee. Depreciation and interest costs linked to these projects, along with the acquisition of a vessel to support coastal shipping operations, weighed on short-term margins. The company emphasized that these investments are strategic in nature and are expected to enhance operational efficiency and support profitability over the longer term as capacity utilization improves.
Construction activity showed strong momentum during the quarter, as reflected in the Sri Lanka Purchasing Managers’ Index for Construction, which peaked in September and remained elevated through October 2025. This momentum translated into sustained volume growth for the cement industry, supported by demand from hospitality projects, housing developments, and large- and medium-scale condominium construction. Regional infrastructure initiatives also contributed to broader industry expansion.
However, the positive trajectory was disrupted toward the latter part of the quarter by Cyclone Ditwah. The cyclone triggered widespread flooding and landslides, causing significant damage to buildings, agriculture, and critical infrastructure. According to the World Bank’s Global Rapid Post-Disaster Damage Estimation report, the direct physical damage from the disaster was estimated at $4.1 billion.
The immediate aftermath of the cyclone led to a slowdown in construction activity during the final week of November, with disruptions continuing through December due to logistical challenges and seasonal holidays. In response, the Government, supported by local and international partners, initiated comprehensive reconstruction and compensation programs that are expected to be rolled out in the coming months. Emergency funding support includes assistance from the International Monetary Fund and the World Bank.
Despite these disruptions, broader macroeconomic conditions remained relatively resilient. The rupee depreciated by approximately 6 percent against the US dollar during the period, yet fiscal performance benefited from improved revenue collection and strong inflows from tourism and workers’ remittances. Export earnings reached $12.99 billion between January and September 2025, representing year-on-year growth of 7 percent, while remittances rose 20.7 percent to $7.19 billion in the January to November period.
The continuation of twin surpluses in the primary fiscal balance and the external current account reinforced signs of macroeconomic stability, even in the wake of Cyclone Ditwah. Analysts have noted that these indicators provide a supportive backdrop for investment-led growth.
Commenting on the outlook, Tokyo Cement said multilateral lending agencies and local analysts have highlighted the robustness of key fiscal metrics. The persistence of low interest rates, relative currency stability, and subdued inflation over the medium to long term is expected to support sustained economic expansion and construction sector recovery.
Historically, the cement industry records its strongest performance during the January to March period, corresponding with the fourth quarter of the financial year. Current industry data point to a positive outlook for the coming months, supported by the launch of new development projects and the anticipated acceleration of post-cyclone reconstruction.
The 2026 Budget allocation of Rs. 1.38 trillion for capital expenditure is expected to play a critical role in sustaining industry momentum. Major investments in highways, road networks, irrigation, energy, and local infrastructure, along with flagship projects such as the World Bank-funded Kandy Multimodal Transport Terminal and the Japanese-funded Kadawatha–Meerigama section of the Central Expressway, are expected to generate substantial demand for cement and concrete.
Further demand is anticipated from the awarding of the Bandaranaike International Airport Development Project Phase II, funded by the Japan International Cooperation Agency. In addition, a significant share of the Rs. 500 billion supplementary allocation for post-cyclone rebuilding is expected to be directed toward housing, transport networks, schools, and essential infrastructure.
Against this backdrop, Tokyo Cement 3Q results indicate that the Group is well-positioned to benefit from the expected upswing in construction activity. The company said its continued focus on capacity enhancements, disciplined cost management, and operational efficiency will support value creation as development activity gains traction in the months ahead.