Tokyo Cement Group sales volume drops due to supply chain issues
View(s):Tokyo Cement Group (Tokyo Cement) has reported its financial performance for the third quarter ending 31st December 2021, with a turnover of Rs.13,771 million reflecting a Year-on-Year growth of 20 per cent, compared to Rs. 11,456 million during the same period last year.
Despite a turnover growth, Tokyo Cement’s sales volumes reduced by 3 per cent compared to the third quarter last year due to supply chain shortfalls, the company said in a media release.
The group recorded Rs.1,986 million profit before tax for the third quarter, a 38 per cent growth against Rs.1,442 million for the same period last year, whilst recording a profit after tax of Rs.1,649 million as against Rs.1,303 million during the same period last year.
The increase in cost of production due to increased freight and raw material costs, and currency depreciation, led cement manufacturers to increase the retail price of a 50kg bag of cement to Rs.1,275 with effect from last November.
This 16 per cent increment of price in a period of three years (against the MRP of Rs. 1,095 in 2019) is denoted the lowest price increase across any building material, despite significant cost increases during the same period.
Further freight and raw material cost hikes increased the price of a 50kg bag of cement to the current retail price of Rs.1,375 from January 1.
The release said that unlike the preceding quarter this quarter did not see any lockdowns or strictly enforced travel restrictions, allowing for businesses to operate relatively uninhibited. However, the country experienced unusually heavy and persistent wet weather conditions throughout October and November which slowed down construction related activities.
“During this quarter, we saw a scarcity of many construction essentials, from cement to steel to tiles to all types of building materials and household accessories, due to the delays in opening LCs because of forex illiquidity. This shortage of construction materials in turn led to project delays and idle labour, and therefore additional project expenditure,” it said.
This situation was compounded by finished cement importers drastically cutting down importation due to heightened fiscal barriers, thus resulting in a severe market shortage.While Tokyo Cement enforces the MRP with its retailers, the scarcity of cement has allowed for a secondary market to emerge in which cement is sold beyond the labelled prices.
The 3 per cent drop in sales compared to the 3rd quarter last year came as a result of multiple restrictions on the company’s output. Delays in opening LC in a timely manner inhibited the continuous supply of both raw material for production, as well as the importation of cement as a finished good. On the other hand,
Tokyo Cement’s local production process had a minor setback due to a breakdown of a cement grinding mill for a period of more than two weeks towards the end of Q3, the release said.
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