Quarterly Financial Review
Tokyo Cement Group reported a turnover of Rs. 11,665 million for the first quarter ended 30 June 2024, marking a 3% decline compared to the same period last year. Profit After Tax (PAT) also fell by 18% to Rs. 707 million. The revenue drop, despite increased sales volume, was attributed to price reductions in the cement industry.
The company passed on cost savings to consumers, resulting in two price reductions for cement, with the Maximum Retail Price (MRP) of a 50 Kg bag falling to Rs. 2,250.
Economic Environment
The year began with a promising economic outlook, with the country’s GDP growing by 5.3% in Q1 2024. The appreciation of the Rupee against the US Dollar reduced the cost of imported raw materials, enabling further price cuts for cement and other building materials. Decreasing policy interest rates and reductions in fuel, energy, and utility tariffs boosted purchasing power and investor confidence, supporting steady economic growth.
However, heavy rains from mid-May through June disrupted daily life, including construction activities. Despite this, cement consumption increased compared to the previous year. Additionally, the Government’s Rs. 200 billion settlement of outstanding payments to State sector contractors alleviated cash flow issues in the industry, reflected in the increased Sri Lanka Purchasing Managers’ Index for Construction Industry, which rose to 54.5 in May and 59.5 in June.
Outlook
Looking ahead, the Government aims to secure similar debt relief from commercial creditors and resume infrastructure projects worth Rs. 55 billion, which is expected to boost sector growth. Continued low interest rates are anticipated to spur the initiation of new and paused projects. Historically, there is a trend of accelerated construction projects leading up to elections, which Tokyo Cement expects to continue, driven by increased purchasing power and a stable economic environment.
Despite a conservative short- to medium-term outlook, Tokyo Cement remains optimistic about the stabilization of economic fundamentals and will continue its stringent cost control measures. The Group is prepared to adapt to changes in the business environment and actively contribute to the country’s economic recovery.