HeidelbergCement incurs losses for cost escalation

HeidelbergCement Bangladesh Ltd incurred a loss of Tk10.78 crore in the July-September quarter of this year due to an increase in raw material prices and intense competition in the cement industry.

But, according to an unaudited financial statement, its revenue grew 22% to Tk306.40 crore in the quarter although the country faced strict Covid lockdown from 1 July to 10 August.

A senior officer at the cement manufacturer told The Business Standard that, in the first quarter of this year, the company managed a high growth in sales and posted handsome profits.

After that, the company suffered a drop in its business after the price of clinker, used as its raw material, and the freight cost surged. Besides, strict lockdown created more pressure on its business, he added.

The officer said the company could not increase the cement price in line with the cost hike due to intensive competition.

At the end of the first nine months of this year, the German-based multinational company's total consolidated revenue stood at Tk1,266.66 crore and net profit at Tk55.85 crore. Its earnings per share stood at Tk9.88.

However, another multinational cement manufacturer LafargeHolcim Cement posted a 26% growth in sales to Tk460.17 crore and a 43% rise in net profit to Tk93.66 crore in the July-September quarter.

Industry insiders said Lafarge produces raw material in its own plant which is why it can control its production cost.

Meanwhile, HeidelbergCement was listed on stock exchanges in 1989. The company failed to pay any dividend for 2019 for incurring losses, but it had paid a 20% cash dividend for 2020 although the loss continued.

Investors feel confident in this share as the company got back to profit this year. That is why its share price rose 123% in the last six months. On Monday, its share price closed at Tk361.90 each at the Dhaka Stock Exchange.

According to the Bangladesh Cement Manufacturers Association (BCMA), the prices of cement clinker and other raw materials, as well as shipping costs, have gone up by $20 per tonne over the last three months due to rising prices in the international market.

Three months ago, a 50kg bag of cement was sold at Tk420 in the domestic market. Now it is being sold at Tk450. The manufacturing companies are incurring a loss of around Tk40 per bag of cement, it added.

Bangladesh has a monthly demand for 40 lakh tonnes of cement, said Mohammad Shahidullah, first vice-president of the BCMA.

He added that the cement clinker is made from coal. The price of coal in the international market has increased by about 50% over the past three months. As a result, the price of cement raw materials has also increased.

In addition, the international shipping cost has increased by 50%. On top of this, the supply of goods is being disrupted.

BCMA President Alamgir Kabir had earlier said in a press statement that cement companies are facing pressures to raise the prices of finished goods, but the extreme competition in the local market barely allows prices to be increased.

The association has requested the government to allow them some spaces for profitability through rationalisation of the tax burden so that cement remains affordable to middle-income people, keeping the wheel of development rolling.

The BCMA said if the National Board of Revenue brings the existing high taxes down, cement sales would grow and offset the effects of tax reduction. Their demand also includes eliminating double taxation and reducing import duty to Tk250 from Tk500 per tonne.