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Crown Cement’s H1 profit drops despite revenue surge

Shakhawat Hossain Sumon
28 Jan 2023 00:00:00 | Update: 28 Jan 2023 13:58:33
Crown Cement’s H1 profit drops despite revenue surge

MI Cement Factory Ltd, also known as Crown Cement, witnessed a 15 per cent year-on-year slump in net profit in the first half of the current fiscal year, thanks to volatility in currency exchange rates and a hefty cost for the interest payment against bank loans.

The cement maker posted this heavy loss at a time when its first half yearly revenues surged by 29 per cent on a year-on-year basis.

The company reported a net profit of Tk 9.42 crore in the July-December period of the fiscal year 2022-23 against a profit of Tk 11.06 crore in the same period of last fiscal.

The listed company logged revenues worth Tk 1130.7 crore in the July-December period of the fiscal year 2022-23, up almost 29 per cent than the revenue of 872.73 crore for the same period last fiscal year.

The company’s H1 revenue in FY21 was Tk 708.73 crore.

According to the company, its sales revenue in H1 of FY23 had surged by 26.56 per cent year-on-year due to an increase in sales volume of 12.17 per cent and a price hike of 15.50 per cent.

Meanwhile, the import costs of raw materials rose abnormally due to a steep depreciation of the taka against the US dollar, eating up the large portion of its earnings.

The company’s financial costs increased by Tk 73 crore or 354 per cent year-on-year in the first half of the current fiscal year due to a loss of Tk 66 crore for volatile currency exchange rates, and a surge of Tk 13.9 crore as bank interest costs, the company stated.

The cement maker in June 2021 invested Tk 770 crore to uplift its production capacity by setting up the sixth production line in its existing Munshiganj factory.

To implement this expansion plan, it had taken bank loans on high interest rates.

According to the company’s H1 financial report for FY23, its short and long-term loans increased by Tk 113 crore, or 15.96 per cent due to the receipt of a term loan from the IDCOl for the expansion of the sixth unit.

Now, the company has to pay interests against the loan by converting the taka into foreign currency at higher exchange rate, pushing up the costs.

Although the company’s revenue increased by 29.56 per cent in the half year of FY23 on a year-on-year basis, its earnings fell by 14.80 per cent due to an unprecedented foreign exchange losses caused by the USD/Tk conversion rate.

Mohammed Jahangir Alam, chairman of Crown Cement, stated in its latest annual financial report, “The ongoing Russia-Ukraine war further disrupted an already strained supply chain and exacerbated the existing global inflationary pressures, as evidenced by rising food and energy prices around the world.”

“This war will have a very negative impact on the construction industry, even though most construction industry experts believe that the volume of construction operations in both the private and public sectors will increase moderately in the coming days,” he added.

The company’s earnings per share stood at Tk 0.63 for H1 of FY23, against Tk 0.75 for the same period last year.

Incorporated in 1994, Crown Cement started its commercial operation with a production capacity of 600 tonnes of cement per day in 2000.

The company got listed on Dhaka and Chittagong stock exchanges in 2011, and launched the operation of its 4th unit same year.

The company’s shares closed at Tk 74.40 per share on Thursday.

It has a paid up capital of Tk 148.50 crore.

According to industry insiders, there are around 35 active cement makers in the country.

Although the annual demand for cement is 3.50 crore tonnes, the country has now a production capacity of 8 crore tonnes.