Companies

Tokyo Cement 3Q earnings dampen with construction sector slowdown

Tokyo Cement Group saw its earnings for the third quarter ended 31 December 2023 (3Q24) contract by 64.8 percent Year-on-Year (YoY) to Rs. 195.6 million due to the slowdown in the construction industry.Deepening the impact of the wider national economic slowdown on the construction industry, cement consumption continued to decline during the quarter under review.

The Maximum Retail Price (MRP) of cement remained unchanged during the quarter as competition intensified to maximise the share of a rapidly shrinking market.This was further exacerbated by the increase in VAT and income taxes on consumers. Both residential and business sector customers were impacted by the electricity tariff increase announced in mid-October, Tokyo Cement said.

“The contraction of the construction sector was highlighted by the reduction of work on ongoing projects whilst only a very few new projects commenced during the latter part of the year. “Construction firms were skeptical of any progress due to the concerns surrounding possible upward revision of material prices as a result of announced tax revisions,” the entity said in a results statement.

The market shrinkage was further aggravated by the persistent adverse weather across most parts of the island. The impact of the inclement weather cannot be understated as it disrupted the construction industry and the distribution of construction materials to sites as monsoon lasted from August till December, Tokyo Cement said.Meanwhile, for 3Q24 period, the Group posted a revenue of Rs. 11,348 million, 6 percent contraction YoY.The entity saw its earnings per share reach Rs. 0.44 from Rs. 1.26 recorded in 3Q23.Turnover for the 9 months ended 31 December 2023 was Rs. 36,679 million, a 13 percent decline over the same period of the previous year. Earnings for the same period were Rs. 1,700 million, a 60 percent decline YoY.

Providing an outlook, Tokyo Cement said that in the short to medium term, the stabilisation of the currency should allow for commercial and private sector development projects to resume. However, domestic consumption is expected to recover only in the long term, due to reduced purchasing power, a weakened currency, and increases in utilities and taxes. “The Group is currently observing some resumption of both private sector and institutional construction projects. In preparation to cater to the future growth in demand in the local construction industry, Tokyo Cement Group will continue the expansion plans currently underway to increase its local manufacturing capacity,” it said.

( Source : Daily Mirror)