Heidelberg returns to profit on back of increased retail price

Heidelberg Cement Bangladesh, the maker of the well-known brand Scan Cement, witnessed a significant growth in its gross profit margin in the January-March quarter of 2023, thanks to higher sales realisations due to an increase in retail cement prices.

The listed cement maker reported a 15 per cent growth in its gross profit margin in the recently concluded March quarter, against a 5 per cent growth in the same quarter a year ago.

The retail sale prices of the company’s cement soared around 22 per cent, which helped it register such a profit margin growth. Furthermore, in 2022, the average sales per 50-KG bag witnessed a 15 per cent increase, reaching Tk 379 sales per 50-KG bag compared to Tk 330 sales per 50-KG bag. The upward adjustment of retail prices has positively impacted the overall sales performance of the company, the report said.

The upward adjustment of retail prices, according to a report produced by EBL Securities, has positively impacted the overall sales performance of the publicly traded company.

As per the report, the multinational company experienced a notable improvement in profitability margins during the first quarter of the ongoing calendar year.

Its gross profit margin in the January-March quarter this year surged to 15.2 per cent, surpassing the three-year average of 9.72 per cent.

Additionally, the multinational cement maker’s operating profit margin (OPM) and the net profit margin (NPM) have also shown significant growth in the quarter, reaching 9.9 per cent and 6.8 per cent respectively, compared to the three-year averages of 2.7 per cent and 0.4 per cent respectively.

The Germany-based cement manufacturing firm also experienced a 2 per cent rise in its sales volume in the year 2022, registering 2.21 million tonnes of sales of cement last year against 2.17 million tonnes in the previous year.

Heidelberg’s primary revenue stream is derived from the sale of cement, with a significant proportion coming from local sales.

Approximately 99 per cent of the revenue in 2022 was generated from domestic sales, while the rest came from exports. Out of the total sales revenue, which amounted to Tk 1,676 crore, the company’s Chattogram, Kanchpur, and Mukterpur units contributed 31 per cent, 49 per cent, and 20 per cent respectively, as per the EBL Securities report.

Although the multinational cement maker returned to profitability in the first quarter of 2023 riding on higher retail prices, it might face challenges in the year’s remaining quarters due to adverse macro factors, monsoon season issue, and a probable sluggish demand during the election period, EBL Securities report noted. The rise in energy and fuel prices impacted the company’s financial performance and influenced its overall cost structure. Fuel and energy account for approximately 35 per cent of the company’s manufacturing expenses.

According to the EBL Securities study, Heidelberg Cement has successfully reduced its operating expenses in the first quarter of 2023, helping it overcome the impact of the hike in fuel and energy prices.

Improved cost management and operational efficiency, resulting from the amalgamation of Emirates Cement and Heidelberg Cement in November 2021 led to such improvements in the cost structure of the company.

The multinational company posted Tk 38.19 crore in net profit in the three months ending on March 31, against a net loss of Tk 16.77 crore in the same period a year ago.

The listed company’s earnings per share (EPS) surged to Tk 6.85 in the January-March quarter of 2023, against a loss of Tk 2.97 in the same quarter of 2022. It also recorded increased net operating cash flow per share during the period.

The positive first quarterly earnings came after the company had suffered a net loss of Tk 23.34 crore in 2022.

It declared a 10 per cent cash dividend for the year ending in December 2022.

The company’s net asset value (NAV) per share was Tk 66.9 as on March 31, 2023

Heidelberg Cement shares closed at Tk 286.70 each on the Dhaka bourse Sunday.

Heidelberg, a Germany-based cement manufacturing company, represents renowned cement brands namely RubyCement and ScanCement.

In 2021, two subsidiaries of the company, namely Emirates Cement and Emirates Power, amalgamated with Heidelberg. With three plants in Kanchpur, Chattogram, and Mukterpur, Heidelberg has an annual production capacity of 3.51 million metric tonnes of cement.