Sri Lanka Tokyo Cement Q3 net falls on building slowdown

Sri Lanka's Tokyo Cement group said September quarter net profit fell 12 percent to 139 million rupees from a year ago owing to a drop in sales which however are expected to pick up.

The firm said in a stock exchange filing of interim results that sales during the quarter were flat at 4.3 billion rupees although operating profit rose by half to just over a billion rupees.

Earnings per share fell to 5.15 rupees from 5.84 rupees over the period.

The company is a joint venture between Nippon Coke & Engineering Company (formerly Mitsui Mining Co.), the largest coal-mining company in Japan, and the local St. Anthony's Consolidated.

It attributed the drop in sales to "sluggishness" in the construction industry, which has seen a downturn in recent months as the economy slowed down.

Profits were also affected by an increase in depreciation charges following the commissioning of a new mill and biomass power plant at its factory in the eastern port of Trincomalee.

Tokyo Cement said there had been am "appreciable increase" in interest due to financing of the new mill and the biomass power plant costing about five billion rupees.

"At planning stage it was expected to finance part of the cost out of internally generated funds," it said.

But this was not possible owing to delays in the construction period caused by late arrivals of foreign commissioning engineers because of security concerns in the country at that time and also owing to cost over-runs.

Security concerns related to the island's 30-year ethnic war in the north-east which however ended in May when government forces defeated the Tamil Tiger separatists.

Tokyo Cement said short-term prospects appeared good with "sales likely to improve with the revival of the construction industry and opening of the roads to the north.

"The operation of the new mill is geared to meet the increase in demand," it said.

The biomass power plant now in operation will not only see substantial reduction in energy cost but will also be a source of revenue by way of sale of excess power to the national grid.

The firm said it received tax free dividend income of 1.150 billion rupees from Fuji Cement, a fully owned subsidiary company.
From China Cement (2009-11-10)