KUALA LUMPUR (April 27): Cement producer Tasek Corp Bhd’s net profit in the first financial quarter ended March 31, 2017 (1QFY17) plunged by 84.3% to RM3.56 million or 2.91 sen per share on lower revenue, higher production costs and lower interest income.

This compares to RM22.67 million or 18.65 sen per share in 1QFY16.

In 1QFY17, Tasek Corp registered revenue of RM132.33 million, a decline of 22.6% from RM170.98 million a year ago. The group attributed the fall in topline, mainly to lower demand for cement in the domestic market, as well as lower average net pricing for both cement and ready-mixed concrete.

The cement division posted lower operating profit of RM879,000 in the quarter under review, versus RM25.4 million in 1QFY16, mainly on declining sales volume and lower average net pricing, which arose from the prolonged price competition in the domestic market.
 
“Higher production cost, increased costs of fuel and electricity, also contributed to the lower profit for the quarter,” the group said.
 
Similarly, the ready-mixed concrete division recorded lower operating profit of RM1 million against RM1.4 million a year earlier, despite increase in sales volume, as the margin of contribution was lower in 1QFY17.
 
Prolonged price competition for cement, as well as general slowdown in the property sector, contributed to lower pricing in the ready-mixed concrete division, which affected the margin, the group added. 
 
The division’s margin of contribution was further affected by higher cost of cartage from rising diesel cost.
 
On outlook, Tasek Corp expects 2QFY17 to be challenging, with intense price competition for cement, as well as softening of the domestic property market.
 
Meanwhile, the pickup in demand for cement and ready-mixed concrete would depend on timely roll-out of the remaining packages of existing public sector infrastructure and several catalytic developments in Kuala Lumpur, it added.
 
Tasek Corp closed 0.7% higher at RM13.60 today, valuing the group at RM1.65 billion.