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Lower costs, higher sales help the cement maker post healthy earnings

Heidelberg Cement back to profit in H1

Staff Correspondent
26 Jul 2023 20:38:33 | Update: 26 Jul 2023 20:38:33
Heidelberg Cement back to profit in H1

Heidelberg Cement Bangladesh, the maker of the well-known brand Scan Cement, has returned to profit in the first six months of the current year, thanks to a reduction in cost of sales, and an increase in sales volume.

As per its unaudited financial statements published on Wednesday, the German-based cement manufacturer made a profit of Tk 47.8 crore in January–June 2023, against a loss of Tk 20.5 crore during the same period last year.

After suffering losses in five straight quarters due to higher raw materials costs and the depreciation of local currency against the US dollar, the multinational company had returned to profit in the January-March quarter this year.

Keeping the earnings consistency, the publicly traded cement producer made a profit of Tk 9.11 crore in the current year’s April–June quarter.

The company had incurred a loss of Tk 3.75 crore in the June quarter last year.

The cement maker’s earnings per share (EPS) stood at Tk 1.61 in the second quarter of 2023, which was Tk 0.66 negative in the identical period of 2022.

Its net operating cash flow per share (NOCFPS) was Tk 40.68 for January–June 2023 against Tk 5.34 negative for January-June 2022.

The company said its earnings in the first two quarters of the ongoing year increased due to higher net sales price, while the NOCFPS increased owing to higher sales collection, supplier payments shifting to UPAS loans, and higher bank interest income.

Meanwhile, the net asset value (NAV) per share increased due to higher net profit and an improvement in net working capital, the company added.

The retail sale prices of the company’s cement soared by around 22 per cent in the first quarter this year, which helped it register such a profit margin growth. The upward adjustment of retail prices has positively impacted the overall sales performance of the company, the company’s financial 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 EBL Securities 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 current year’s March 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 cement sales last year against 2.17 million metric tons in the year before.

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

Approximately 99 per cent of its revenue in 2022 was generated from domestic sales, while the rest came from exports. Out of the total sales revenue last year, 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, the 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 company declared a 10 per cent cash dividend for the year ending in December 2022.

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

Heidelberg Cement shares closed at Tk 289.10 each on the Dhaka bourse Wednesday.

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, got 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.