Pandemic leaves little impact on steel, cement makers

Leading steel, cement and paint companies related to the construction sector witnessed higher profits in the July-December period of the current financial year despite the ongoing coronavirus pandemic.

Although industry insiders fear that they will face 30 per cent lower profits from the July-December period, the reality is different as profits came mainly due to higher demand from government development projects.

Among five listed cement manufacturers, three saw higher profits, one returned to profits and the last incurred a loss albeit on a lower extent compared to that in the same period the previous year.

Meanwhile, all listed steel mills booked higher profits while multinational Berger Paints, also witnessed higher profits in the period.

Sales volumes significantly increased during the last quarter as the demand for cement increased when all development activities resumed, according to Mohamamd Amirul Haque, managing director of Premier Cement.

"Besides, rural demand is also bouncing back as all rural economic activities are going on in full swing," he said.

Premier Cement booked almost double its half-yearly profits compared to that in the same period of the previous year. Its earnings per share was Tk 2.51 in the July-December period of 2020-21, which was Tk 1.16 previously.

"We did not increase the price of cement to make profit since it is not fair but we want to make profit through improving efficiency," Haque added.

According to the managing director, as a businessperson he always tries to protect consumers' interests and ensure quality products.

There are 37 active cement factories in Bangladesh and more than Tk 30,000 crore has been invested in the industry.

Manufacturers have a combined annual production capacity of 58 million tonnes against local demand of 33 million tonnes.

Of the total demand, individuals account for 25 per cent, real estate companies and developers 30 per cent and public sector 45 per cent.

The industry employs 60,000 people directly and another one million indirectly.

Masud Khan, chief adviser of MI Cement, said they made around 28 per cent higher gross profit during the last quarter as their sales volume was huge.

He however added that the profit margin was limited in terms of volume.

During the pandemic, the company's operational costs as well as freight cost for imported raw materials were reduced, which had an impact on the last quarter.

Government support in the form of stimulus packages also helped reduce financial losses and register better profit compared to that last year.

If this trend continues, cement makers will be able to recover their pandemic-induced losses in the coming days, Khan said.

MI Cement earned EPS of Tk 2.03, which was previously Tk 1.89 in the negative.

Profits of Confidence Cement and Meghna Cement also rose in the period. However, Aramit Cement remained in losses but to a reduced extent.

Along with cement makers, the steel sector did very well.

Tapan Sengupta, executive director of Bangladesh Steel Re-Rolling Mills (BSRM), said demand has gradually increased since July as all mega projects and development activities resumed in full swing.

Their sales volumes increased during the last quarter, as a result of which the profit margin increased, according to Sengupta.

The stimulus package also helped to reduce the interest rate and besides, raw materials were imported at a cheaper rate during the pandemic while manufacturers also had previous inventory left over.

"For this reason they made some profit," he said, adding that the mill also ran in full swing in line with increasing demand.

Post-Covid demand for steel was good because government works along with private sector construction works resumed, said Kamrul Islam, executive director (finance and business development) of GPH Ispat.

"Moreover, steel prices rose in the international market so the local market's profits were positively impacted," he said.

The government's incentive package and single digit interest rate also had a positive impact on the sector because most companies have a big amounts of loans.

"Our profit growth was in double digit because our new factory started to supply products," Islam added.

GPH Ispat's earnings per share rose 113 per cent to Tk 1.75.

The steel industry in Bangladesh is worth Tk 55,000 crore.

There are about 40 active manufacturers with a combined capacity to produce nine million tonnes of steel a year. Of them, Abul Khair Steel, GPH Steel, the BSRM and Kabir Steel Re-Rolling Mills meet more than half of the annual demand of eight million tonnes.