Tokyo Cement (TKYO) reports a loss as Sri Lankan construction industry slows in Q1

June 24, 2018 (LBO) - The Central Bank of Sri Lanka recently released its first quarter GDP report. Growth was a tepid 3.2% for the quarter ended March 31, 2018. Digging deeper, one saw a rebound in agriculture with a growth of 4.4%, and services meandering along with the same 4.4% year over year growth rate. The weakness in the GDP report was industrial activities with a growth rate of just 1%.
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Within industrial activities is construction, which showed a notable negative growth of 4.9%. The construction industry has contracted year over year for the first time in years. Analysts cite the slowdown in construction as one possible reason for the weak results from listed Tokyo Cement (TKYO) in the March 2018 quarter. For the quarter TKYO reported a loss of Rs303mn versus a prior year profit of Rs910mn. Although revenue was down just 2%, cost of goods was up 12% causing significant gross margin compression. The stock last traded at Rs35, close to its net asset value of Rs38.
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