TANGA Cement has announced profit shrinking in this year first half, citing oversupply of cement due to cheap imported clinker. The cement maker, trading as Simba, cut down pre-tax profit to between 125 per cent and 135 per cent lower than what achieved in first of last year.
Tanga Cement Chairman, Lawrence Masha, said that competitive cement sales environment continue leading to lower prices of cement. “The firm adopted a more proportionally responsive pricing strategy to sustain its market sales volume but margins and overall profitability remain under pressure,” Mr Masha said in a statement yesterday.
The chairman added that the profitability pressure was compounded further by the influx of “new low price competitors using larger proportions of imported clinker.”
Simba, the main producer of road infrastructure cement, expects loss per share will be around 220/- and 245/- per share, being 225 per cent and 239 per cent lower than 176/- earning per share in H1 last year.
Zan Securities Chief Executive Officer Raphael Masumbuko said scaling down of Simba profitability paints a picture of “possibility of no dividend” in H1. “The announcement would not lower further share price… if investors look at the construction sector which is still developing,” Mr Masumbuko told ‘Daily News’.
He said long term investors expected to hold their investment since the current construction trend shows positive future ahead. Bank of Tanzania quarterly report showed slightly increase shares of commercial banks’ credit to building and construction sector to 4.7 per cent in June from 4.5 per cent June last year to total outstanding credit.
On other hand credit annual growth rate of the sector was 5.5 per cent of total loans in the market down from 10 per cent at end of June last year. Simba share price plunged 25 per cent to 1,200/- from 1,600/- since January.
Recently, Tanga Cement said cheap imported clinkers were threatening cement firms survival. The firm said five self-clinker producers may jump into importation bandwagon of seven noneclinker producers since costs of local are higher compared to imported one.
Iran and Pakistani clinker producers are not after profit making rather making foreign currencies to their respective countries.
According to industrial analysis, clinker installed capacity will reach 5.0 million tonnes in next four years from current 4.8 million tonnes. The big five cement firms, Tanga Cement, Mbeya Cement, Rhino Cement, Twiga Cement and Dangote Cement produce their own clinkers.