Covid-19 puts LafargeHolcim in dire straits

Cement producer LafargeHolcim Bangladesh Ltd is feeling the pressure in business performance amid the coronavirus outbreak. 

The company posted a decline in its first quarterly (January-March) revenue, followed by a reduction of 60 percent in its production due to low demand in April, LafargeHolcim said in a statement forwarded to The Business Standard. 

The company is grappling to recover its fixed costs since most of its construction sites have remained closed for the last 45 days due to the nationwide shutdown.  

More difficult times are ahead in the coming months, the statement adds. 

The company is currently operating and serving its customers following social distancing guidelines and health instructions issued by the government as well as the LafargeHolcim Group.

During the first quarter of 2020, net profit of the company rose by 46 percent to Tk52.24 crore. Its earnings per share and net asset value per share stood at Tk0.45 and Tk14.23, respectively.

In an unaudited statement, a company official said that the net profit rose in the first quarter of 2020 mainly due to a decrease in its production costs.

However, the cement company's consolidated sales revenue during the same period dropped by 1.5 percent to about Tk513 crore.

LafargeHolcim had a good business in the beginning of the first quarter before the coronavirus outbreak.

The company official also said that the revenue slid due to a decline in sales at the end of March because of the Covid-19 shutdown.

Earlier, the company management recommended 10 percent cash dividends to its shareholders for the accounting year 2019.

It has already postponed its annual general meeting and record date due to the Covid-19 shutdown.

"The year 2019 was challenging for the cement industry. The impact of increased raw material costs and additional taxes were significant," said Rajesh Surana, CEO of LafargeHolcim Bangladesh. 

He added that despite this impact, LafargeHolcim demonstrated a strong performance trend. 

"Our focus on improving operational efficiencies, driving commercial innovation and cost optimisation continues to be effective."

Currently, LafargeHolcim has a capacity to produce 4.2 million tonnes of cement, which makes up 10 percent of the market in Bangladesh.

LafargeHolcim, which was listed on the capital market in 2003, has a paid-up capital of Tk1,161 crore. Sponsors and directors of the company hold 64.68 percent of its shares, while institutional investors hold 15.83 percent, foreign investors hold 1 percent, and general investors hold 18.49 percent of the shares. 

LafargeHolcim Bangladesh Ltd is a frontline cement producer in the country. It is a joint venture of LafargeHolcim and Cementos Molins.