Simba cement profit drops 33%

Tanga Cement’s net profit has dropped to 10.5bn/- in the first half of this year, almost a one-third decline from 16.6bn/- posted in the corresponding period last year.

The cement firm, trading on the Dar es Salaam Stock Exchange (DSE) as Simba, has attributed the profit decrease to increased competition and expenses. Simba Cement’s financial results issued in Dar es Salaam yesterday showed that net profit dropped due to low sales.

“The low sale volume, together with reduced selling prices, reduced sales revenues by eight per cent to 122.62bn/-,” Simba Cement’s Chairman Laurence Masha said in the statement.

The cement firm that trades on the Dar bourse said, however, that the cost of sales declined by 3.4 per cent despite annual kilning maintenance that usually takes place in May.

“This (kiln maintenance) should reflect positively during the second half of this year,” Mr Masha said noting, however, that the future remains highly competitive and challenging. Mr Masha was appointed the chairperson of the Simba Cement in May following the retirement of Prof Samuel Wangwe.

Also the Managing Director Erik Westerberg resigned in early July and Reinhardt Swart is manning the post on acting capacity. Zan Securities Chief Executive Officer, Raphael Masumbuko, said Simba and Twiga cement firms have been affected by unfair competitions from imports that are not paying duties.

“Both (Simba and Twiga) have posted reduced profits in the first half of this year…this is an indication that the firms have been affected by cement imports that dodge duties,” Mr Masumbuko said.

However, he said the low profitability level is not that bad as both companies have stable market and balance sheets to affect their businesses. “I believe they would make a good performance in the second half of the year as demand for cement products is still relatively high,” Mr Masumbuko said.

To increase kiln output, Simba Cement is planning to construct the second kiln at the factory in Tanga, with commissioning planned for 2015.

The second kiln to increase clinker production capacity from the current 500,000 to 1,275,000 tonnes per year will sufficiently meet the company needs and eliminate imports.

The profitability level lowered the earnings per share to 165/- from 261/- registered in the same period in 2012. The share closed the trading session on Monday at 2,380/- each.

Cement firms claim that imports, especially subsidised cement from Pakistan, are being dumped in the domestic market subjecting the government to 25bn/- loss in import duty taxes, annually. The imports also create unfair competition to local manufacturers.
Source: Daily News, reported by Abduel Elinaza, from Dar es Salaam, Tanzania
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