HomeBusiness Digest$28,6b profit at Cement - thanks to inflation dip

$28,6b profit at Cement – thanks to inflation dip

Roadwin Chirara

CEMENT producer, Circle Cement, has declared a profit attributable to shareholders of $28,6 billion in its half-year results ending June 30.

l, Helvetica, sans-serif”>The company’s profit, which is a marked increase from last year’s figure of $3,9 billion, has been largely attributed to the decline inflation and stable exchange rates during the period under review.

Chairman Muchadei Masunda however said the operating environment changed in the second quarter, resulting in the company incurring increased production costs. He said the situation was worsened by shortages of raw materials such as coal, diesel and packaging materials.

“In contrast, sharp depreciation of the local currency and rising inflation marked the second quarter. This resulted in input costs increasing significantly and in shortages of raw materials,” Masunda said.

He said despite factors such as the increase in production costs in the second quarter, demand for cement also firmed during the same period.

“Demand firmed in the second quarter as government embarked on housing projects under the auspices of Operation Garikai/Hlalani Kuhle,” said Masunda.

He said although cement prices had been adjusted in May by 20%, government was still to effect another price review for mortar and clinker.

“Cement prices were adjusted once in May by 20% and no subsequent adjustment was made during the period,” Masunda said.

Masunda said Circle was expecting to maintain its production levels following the completion of its equipment rehabilitation programme.

“The plant performance is expected to remain good following the rehabilitation programme which has been conscientiously carried out over the past three years,” said Masunda.

He said the company was likely to incur an increase in costs for its off-shore loans due to the continued shift in the country’s exchange rate.

“The group remains exposed to exchange rate movement on its off-shore funding loans,” Masunda said. During the period under review, Circle’s turnover increased by 175% to close the half-year at $154 billion while basic earnings closed at $357,35 per share compared to $49,6 last year.

Masunda said the company’s challenge for the second half was to find a sustainable supply of raw materials. Circle Cement shares were trading at $3 800 per share at the close of trade yesterday, while Pretoria Portland Cement notched a high of $2,5 million a share.

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