Cement newsbytes: Thatta Cement

2013 – 2014 Half Yearly Report

Industry overview

• The industry recorded a growth of 1.07% y/y in 1H14 (ended 31 December 2013).
• Major changes in the sales tax on cement resulted in a substantial increase in retail price and lower sales volumes. Some of this impact was absorbed by the industry to alleviate abnormal pressure on retail outlets and consumers.
• Local sales in 1H14 increase by 2.12% y/y, whereas exports decreased by 1.85% y/y. This was achieved despite adverse affects such as a poor law and order situation, the ongoing energy crisis, an increase in power tariffs and higher inflation.

Production and sales

• Thatta Cement’s capacity utilisation stood at 56%, compared to 76% in 1H13. Overall clinker production decreased to 126 567 t in 1H14, from 170 637 in 1H13. Cement production also fell from 167 885 t in 1H13 to 143 834 t in 1H14.
• Overall cement dispatches (including GBFS) decreased by 11.06% (19 807 t) to 159 256 t in 1H14, from 179 063 t in 1H13, as a result of the imposition of sales tax.

Financial performance

• Turnover decreased by 4.35% y/y from Rs.1.09 billion t in 1H13 to Rs.1.04 billion in 1H14.
• Gross profit increased to Rs.284.9 million in 1H14, from Rs.202 million in 1H13. The gross profit margin increased to 27.29%, compared to 18.51% in 1H13 due to an improvement in prices.
• Profit after taxation improved to Rs.88.7 million in 1H14, compared to Rs.24.2 million in 1H13.
• Earnings per share rose to Rs.0.89, against Rs.0.24 in 1H13.

Outlook

Favourable domestic and global factors are expected to have a positive impact on the cement industry and significant growth in demand is expected following the winter months. Government spending on infrastructure and an increase in housing projects are set to be the key drivers of demand growth in the cement sector. The government has shown commitment to tackling the energy issue by making payments to IPPs and taking further steps to minimise its impact on industrial growth.

Sri Lankan cement project

Construction work on Thatta Cement’s proposed cement grinding, storage and bagging plant in Sri Lanka has been suspended due to the delayed signing of a land lease. The company’s Sri Lankan subsidiary signed a Business Venture Agreement (covering a period of 25 years) with the Sri Lanka Ports Authority (SLPA) regarding the construction of the plant in early 2013. The facility is located at Magam Ruhunupura Mahinda Rajapaksa Port and will have an initial production capacity of 100 000 tpa, increasing to 1 million tpa over 10 years.

In a Karachchi stock exchange filing, the company commented that the SLPA had not executed a land lease agreement, despite basic engineering having been being completed by Thatta Cement Company (Pvt) Ltd. The facility is located in close proximity to a car transhipment unit, which may result in operational conflicts. Concerns have arisen that cement dust from the plant could settle on the new cars being transshipped via the port.

According to local press, a company official said that Thatta Cement respected environmental regulations and will comply with any local requirements, but further stated that it is difficult to completely eliminate cement dust. An environmental impact study is currently being conducted on industries surrounding the port.

Edited from various sources by Rosalie Starling

Read the article online at: https://www.worldcement.com/asia-pacific-rim/17032014/cement_newsbytes_thatta_cement_905/