Tanga Cement shareholders are bracing for a higher loss per share as the firm liabilities are disrupted by loans, power cuts and the cyclical nature of the cement business.
The Tanga-based cement manufacturer said in a cautionary notice on Thursday that it expected a loss per share of between 40/- and 20/- for this year’s second quarter (Q2) which is a higher loss per share of 12/- recorded in quarter one.
The Dar es Salaam Stock Exchange (DSE) listed firm traded as Simba cement attributed the loss to its US dollar loan interest rate cap and rampant power cuts which affects production outputs.
“The contributing factors…are seasonality and cyclical nature of the cement business between the first and second quarter as well as the impact of the change in fair valuation of the foreign currency denominated interest rate cap hedge on our US dollars loans,” the cement manufacturer said.
On top of the two challenges, Simba cement said the performance was further impacted by increased fuel prices and logistic costs which led to an increase in raw material prices and power cuts.
“…frequently electrical power cuts which resulted in increased fuel consumption for own generators and increased maintenance costs of equipment caused by power dips…resulted in decreased production volumes.”
The company said it expects to publish quarterly financial results for Q2 by today.
Alpha Capital Head, Research and Financial Analytics, Imani Muhingo said the main reason for increased net losses is the change in fair valuation of the interest rate cap hedge on the US dollars loan.
“This is caused by contractionary policies adopted in the US to curb inflation, including rising of interest rates,” Mr Muhingo told Daily News yesterday
The policies affected Tanga Cement’s debt because all of the manufacturer’s US dollars debt facilities are pegged to the Libor, plus a certain fixed premium.
“But that is a non-monetary entry, therefore it’s not really a big deal….The challenge is on increased cost of production and logistics,” he said.
Quarter three which ends this month is expected to be worse as the company reported a significant drop in production due to frequent power cuts since the beginning of July.
“The company reported that production of both, cement and clinker, dropped by more than 75per cent since the beginning of July,” Mr Muhingo said.
Tanga Cement share started off the year trading at 1,100/- closed at 1,520/- on Wednesday.
According to DSE rules updated this April required listed firms to compare on quarterly to quarterly basis on the same calendar year instead on yearly quarter basis and issued a cautionary statement if the results show a difference of 25 per cent.
Last year Tanga reported recorded a net profit of 3.5bn/- compared to a net loss of 2.1bn/- in 2020.
The firm late last year also announced a proposed acquisition by Scancem International DA of 68.33per cent of the shares in Tanga Cement to AfriSam Mauritius Investment Holdings. The parties are waiting for the outcome of the deliberations of the regulators.
