Raw material from its own source, strong distribution channels and a new product have helped LafargeHolcim Bangladesh post an impressive growth of 98% to Tk103.5 crore in net profit in the January-March quarter.
According to an insider of the company, during the period, its focus on supply chain management, contract negotiations and improved production efficiencies have helped the multinational cement manufacturer mitigate the impact of softer volume growth.
"Fixed costs were also significantly lower during the year. The company's cost management and operational efficiency programmes have maintained their strong momentum in the pandemic shock," he added.
Rajesh K Surana, chief executive officer of the company, said in a press release, "We have continued the journey of strong performance with a clear focus on innovation and sustainability. Our new water repellent cement and the new business channel 'direct to retail' have got off to a solid start. This is yet another manifestation of our continued endeavour in serving our customers better by realising their needs."
"We have also started producing clear size aggregates effective this quarter which is an import substitution and has the potential of saving substantial foreign exchange for the nation. This is reassuring that we have started receiving positive responses for this product from our customers," he added.
Seeking anonymity, a leader of the Bangladesh Cement Manufacturers Association said LafargeHolcim produces cement raw material clinkers by itself in India. And it has invested a lot in this backward linkage. So, its expenses on raw materials are much lower.
"On the other hand, domestic companies have to import raw materials and pay advance income tax at the import stage. This greatly pushes up their cost of production. Moreover, the import of raw material has been largely affected by the pandemic," he added.
The cement industry as a whole has started feeling the heat from the added 5% minimum tax imposed on the import value of raw materials since 1 July 2019.
Following a plea by cement manufacturers to remove the minimum tax, the non-refundable advance income tax (AIT) was reduced to 3%, effective from 1 January 2020.
Meanwhile, LafargeHolcim's net sales in the first quarter has gone up to Tk631.8 crore resulting in a 23% growth over the same quarter of the last year.
It has recently launched the specialised waterproof cement "Holcim Water Protect", which is the first of its kind in the market and has started yielding incremental growth for the company. Strengthening the digital footprints and improving customer reach are some of the other initiatives helping the company to be more effective and efficient in the marketplace.
Currently, LafargeHolcim has a capacity to produce 4.2 million tonnes of cement, which makes up 10% of the market in Bangladesh.
The company, which has been operating cement business for almost two decades, has invested $500 million – the largest foreign direct investment in the sector – in building one fully integrated cement plant and three grinding plants.
It is a joint venture of LafargeHolcim Group based in Switzerland and Cementos Molins based in Spain. The company has provided direct and indirect employment opportunities for over 3,000 people.
The company's share price at the Dhaka Stock Exchange rose by 1.05% on Thursday, and its closing price stood at Tk57.70 each.
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% of its shares, while institutional investors 16.04%, foreign investors 0.81% and general investors 18.47%.