Crown Cement yet to recover

MI Cement Factory Ltd, widely known as Crown Cement and also a leading cement exporter of the country, has not recovered its business in the July-September quarter of this year compared to the same time of the previous year.

Its net profit also dropped by 11% in that period.

Meanwhile, Crown's close competitors – such as LafargeHolcim, Meghna Cement and Premier Cement – have recovered their business and posted year-on-year growth in the corresponding quarter despite the Covid-19 pandemic.

All the companies are listed on the country's stock exchanges and have published quarterly reports on their websites.

Crown Cement, in its unaudited financial statement, stated that its revenue fell by 6% due to intense competition and the pandemic situation.

Meanwhile, Premier Cement witnessed 2% growth in revenue and a 93% growth in net profit during the corresponding period. Chief Financial Officer of the company Shafiqul Islam Talukder expressed his satisfaction with the quarterly business performance.

"We made some prudent decisions in the previous quarter to procure raw material that helped us save around 5% in raw material cost," he said, adding that saving some for tax provisions helped the company's profit grow.

In the July-September period, Meghna Cement, a sister concern of Bashundhara Group, posted the highest growth in revenue among all listed cement companies.

LafargeHolcim cement's revenue grew 3% and net profit 71%.

During the quarter, an enhanced focus on supply chain management, contract negotiations, and improved production efficiencies helped the company post such growth, according to the LafargeHolcim media statement.

The recent initiatives by the government coupled with improvements in remittance inflows will help the resurgence of rural demand. Further, the government's impetus on infrastructure will play a strong role in driving cement demand, the media statement added.

HeidelbergCement recovered its business well but it is still facing losses.

A top official of the company said the reduction in minimum tax – from 5% to 3% – on the import of cement raw materials, change in market policy and decrease in production costs helped HeidelbergCement see smaller losses during the July-September period.

According to the Bangladesh Cement Manufacturers Association (BCMA), cement production fell by 80% during the 66-day countrywide shutdown put in place to curb the spread of the novel coronavirus, but it has now returned to the normal level, thanks to a resumption of construction activities.

Industry people mentioned that around 70% of cement manufacturers have returned to the growth trajectory in the July-September period, recovering from a 52% decline in sales in the April-June period of this year.

Md Shahidullah, vice-president of the BCMA and managing director of Metrocem Cement, told The Business Standard that the demand for cement on the local market is increasing thanks to the various megaprojects of the government.

Currently, the annual demand for cement is 33 million tonnes, while the industry's installed capacity is 78 million tonnes with another 11 million tonnes expected to be added in the next three years, according to the BCMA.

That has led to intense competition and a price war amid an escalation in raw material costs and utility bills.

Many top cement manufacturers – including Shah Cement, Bashundhara Cement, Premier Cement, and Fresh Cement – faced losses in the April-June period, said officials at the companies.

Md Shahidullah said the industry needs to run at least at 60% capacity to reach break-even. But during the pandemic, most of the companies were running at a 40-50% capacity.

Infrastructure investments from both public and private sectors had helped the cement industry grow at a double-digit rate until 2018. But, in 2019, the industry grew by 6.38% only.

Following this negative situation, Crown Cement has postponed its Tk600 crore expansion plans.

In an official statement, the company said the cement industry has seen a sharp decline in demand in the wake of the outbreak of the novel coronavirus and that the entire industry is currently operating at substantially lower capacity levels.