Although Tokyo Cement Limited had seen a dip in profitability in the year ended March 31, 2008 due to what its Chairman, Mr. Edgar Gunatunga, said was largely due to circumstances beyond its control, he projected prospects for the company in the medium term to "look very positive."

Gunatunga explained that the drop in profitability to Rs.572.5 million for the group, down from Rs.824.2 million a year earlier and to Rs.279.2 million for the company, down from the previous year’s Rs.443.2 million, was due to the high price of clinker and their inability to pass on the full effect to consumers due to the prevailing price control regime.

"A further reason for lower profits was the delay in the completion of the new roller mill as well as the bio-mass power plant," he explained. Both these have now been commissioned.

Also, like other manufacturing companies, Tokyo too had seen a sharp rise in operational, energy and finance costs and it was by better managing these external shocks that they had been able to post profit, though lower than in the previous year.

Despite the dip in profitability, group turnover was up 23% to Rs.13.8 billion. But the cost of sales grew 28% with distribution cost up 9.7% and finance cost up 8.5%. Other income had declined by 58%, all of which contributed to impact on the bottom line.

The company’s Joint Managing Director, Mr. S.R. Gnanam, noted that Tokyo had posted its best ever results in the previous financial year but a multitude of reasons, as explained, had dented profits during the year under review.

Mr. K. Yanagihara, the company’s other Joint Managing Director, said that there were delays in commissioning their new vertical roller mill at Trincomalee due to adverse travel advisories and war risk rating delaying shipment of machinery as well as deployment of engineers in Trincomalee.

"Eventually the machinery was shipped to Colombo and thereafter transported via land to Trincomalee in several stages. The arrival of German engineers was after the situation in the Eastern Province was restored to normalcy. In between the company also had to send its engineering staff overseas as part of the process to expedite the roller mill commissioning," he explained.

"We are glad to report that this highly efficient and advanced Vertical Roller Mill will be commissioned in the early part of the 2008/09 financial year accruing considerable benefits to the company from there onwards."

Yanagihara explained that the roller mill strengthens the overall operational efficiency of their new USD 20 million plant launched in Trincomalee during the year under review which has doubled the group’s production capacity to 1.8 million tons of cement.

"This is more than sufficient to meet the growth prospects of the group in the medium term, Yanagihara explained.

The directors have recommended a tax-free first and final dividend of Rs.4 per voting share absorbing Rs.72 million and 40 cents per one-rupee non-voting share costing Rs.36 million for the year under review.

Tokyo had increased long-term borrowings to Rs.3.5 billion, up from Rs.3.2 billion a year earlier and loan repayments are proceeding as scheduled, the directors said.

The company has a stated capital of Rs.1.8 billion, group reserves of Rs.150 million and retained earnings of Rs.3.1 billion in its books.

Net assets per share had grown to Rs.286 from Rs.256 the previous year and the company’s share closed at Rs.251.25 during the year, up from Rs.250 the previous year.

Foreign shareholders own 39% of voting shares of the company with local shareholders owning 61% while non-voting shares are predominantly held by foreigners (59%) against 41% by locals.

The major shareholders of the company are Mitsui Mining Co. Ltd. of Japan with 4.9 million voting shares and St. Anthony’s Consolidated also with 4.9 million shares. These two groups along with South Asian Investments (Pvt) Ltd and Capital City Holdings (Pvt) Ltd own 73% of the voting shares of Tokyo Cement. They have no interest in non-voting shares which are 100% held by the public.