High costs of sales chop Alaf’s profit

Alaf Limited, a corrugated iron sheet producer, saw its profit dwindling by 36 per cent in this year’s first half on back of escalating costs of doing business.

The firm’s financial statement released in Dar es Salaam showed that the profitability level slumped to 3.56bn/- during the six months ending last June from 5.59bn/- of similar period last year.

Alaf has attributed the profit decline to expenses during the period, saying its costs of sale increased by almost 20 per cent to 65.75bn/- chopping total revenue of 79.76bn/-, substantially.

Also, the financial results show that the selling and administrative expenses increased by 50 per cent to 6.89bn/- from 4.59bn/-, strongly affecting the firm’s balance sheet. 

Confederation of Tanzania Industries (CTI), in its monthly meeting with the Treasury at the first quarter of this year, raised concern over insufficient availability of natural gas in the country and yet at exorbitant prices.

CTI, for instance, claimed that one Gigajoule in Tanzania is being sold at 15 US dollars while the price in the world market is about five dollars. 

Despite complaints over high gas prices, Orca Exploration, the parent company of PanAfrican Energy, increased the gas price in the second half of the year by 11 per cent.

The average industrial gas price is now 8.60 US dollars per standard cubic feet (Mcf) in comparison to the first quarter’s 7.78 per Mcf. Alaf is among the industrial gas users. Weaker shilling also adds up to Alaf cost of sales as fuel prices and imports escalate, pushing up overall expenses.

According to Bank of Tanzania (BoT), the shilling depreciated to an average of 1,603/40 from 1,591/30 per US dollar in the quarter ending March 2013 and 1,530/20 recorded in the corresponding period in 2012, implying an annual depreciation of 4.6 per cent.

However, since January the shilling has depreciated by 0.56 per cent to 1,620/- as of Monday, according to Tanzania Securities - a brokerage firm.

Alaf is a customer-orientated company, primarily focusing on the local markets and neighbouring landlocked countries. 

It was established in 1960 and today is the leading manufacturer and supplier of cold rolled steel coils, roofing, galvanized corrugated iron sheet, pipes, hollow sections and aluminium products in Tanzania.
Source: Daily News, reported by Abduel Elinaza, from Dar es Salaam, Tanzania
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