Devaluation eats up Tanga Cement profit

Tanga Cement Company (Simba) has registered a net loss of 6.94bn/- for the six months to June 2015, compared to a profit of 8.60bn/- posted on the corresponding period last year.

The firm’s officials attributed the trend partly to devaluation of the shilling during most of the period.

“The devaluation of the shilling resulted in a 7.9bn/- unrealised foreign exchange loss...The devaluation made the loan more expensive than when it was incurred,” said the Chairman of the Company’s Board of Director, Mr Lawrence Masha, in a statement.

The firm which trades as Simba yesterday traded at weighted average price of 3,800/- and on Monday the counter had 120 shares traded at the same weighted average price of 3,800/- per share in 1 deal. Gross profit declined to 21.02bn/- in the period under review compared to 29.62 posted in the six months to June 2014.

According to the financial results for the six months to June, Tanga Cement Company Limited that trade at the DSE as Simba, the weak performance is attributed to firm’s decision to cut price in response to increased competition.

“Although sales volumes have been achieved and customers retained, the price reduction resulted in a 2.5 per cent decline in revenue compared to the same period in 2014,” stated the financial report.

Apart from the implementation of price cut, also unplanned production stoppage that necessitated import of more expensive clinker contributed to 38 per cent decrease in operating profit compared to the corresponding period ended June 2014. 

Furthermore, the devaluation of the shilling resulted in a 7.9bn/- unrealized foreign exchange loss and 8.2bn/- realised foreign exchange loss.

The shilling devaluation made Tanga Kiln two loan balances of 84 million US dollars as of June 2015 to be more expensive to repay when compared to when the liability was incurred. Also, higher energy and labour expenses impacted negatively on the firm’s financial performance.

To avert the situation, from July this year the cement firm has implemented price increases to recover th e lost margin and special task team has put plans in place to improve operational efficiency and avoid unplanned breakdown.

Nonetheless all the challenges, the report said Tanzania cement was focused on achieving operational efficiency and overall business effectiveness, enabling the company to limit the increase in production related costs in order to remain competitive in challenging market conditions. 

Similarly, shareholders have reason to smile after the board recommended an interim dividend of 55/- per share amounting to a total interim dividend of 3.5bn/-.
Source: Daily News, reported from dar es Salaam, Tanzania
Share on Google Plus

About Abduel Elinaza

This is a short description in the author block about the author. You edit it by entering text in the "Biographical Info" field in the user admin panel.