Tokyo Cement Group has reported a turnover of Rs. 15,836 million and a Profit After Tax (PAT) of Rs. 635 million for the first quarter ending on June 30, 2026. This marks an increase from the previous year’s turnover of Rs. 12,544 million and a PAT of Rs. 668 million during the same period.
The rise in turnover indicates a gradual increase in sales volume, primarily driven by the initiation of new construction projects. However, despite this growth, the company’s profitability faced challenges due to high raw material costs, along with increased expenses for insurance and freight, which were influenced by ongoing geopolitical tensions in the Middle East.
The economic landscape at the start of the financial year was marked by significant geopolitical uncertainty. The conflict in Iran has put considerable strain on the Sri Lankan economy, resulting in higher fuel and energy prices, disruptions in supply chains, and increased shipping and insurance expenses. Export revenues were limited due to lower global demand and escalating shipping costs, while tourism income suffered as a result of increased airfare and flight interruptions. This confluence of factors has led to a rise in import costs and an approximate 7% depreciation of the Sri Lankan Rupee against the US Dollar during the period. Moreover, domestic inflation has seen a slight uptick due to rising energy and food prices, although it is expected to stabilize towards targeted levels soon. Fortunately, steady foreign exchange inflows from merchandise exports, logistics services, and remittances from sources outside the Middle East have provided some cushioning against external economic pressures.
In response to these economic challenges, the cement industry revised the Maximum Retail Price (MRP) for cement in mid-April, reflecting ongoing increases in raw material, freight, insurance, and fuel expenses. The industry had absorbed these cost increments since the onset of the Iran conflict before deciding to adjust prices.
In May, the Central Bank raised the Overnight Policy Rate (OPR) by 100 basis points, from 7.75% to 8.75%, to manage inflation expectations and address the impact of soaring global oil prices. This adjustment resulted in a slowdown in credit growth and reduced import demand during the period. The combination of rising inflation and ongoing uncertainty has led to more cautious investment choices among private developers and individual investors in the real estate and construction sectors, compounded by supply issues due to shortages of petrochemical-based raw materials.
Cement consumption saw a decline in April, attributed to the seasonal slowdown associated with the Sinhala and Tamil New Year celebrations. However, the gradual recommencement of regional infrastructure projects, especially in the roads and highways sector, has supported a recovery in the demand for cement and concrete during the latter part of the quarter.
Looking ahead, despite the existing macroeconomic volatility, the outlook for the construction sector remains cautiously optimistic, bolstered by improving investment sentiment. Growth in the sector is anticipated to be driven by the initiation and continuation of government-funded infrastructure projects, including those rolled over from the previous year’s capital expenditure budget. These project expenditures are expected to be enhanced by allocations under the 2026 Budget, which should stimulate economic activity and bolster construction demand.
Additionally, momentum is expected to be gained from externally funded development projects, such as the Asian Development Bank-supported Post-Ditwah Cyclone Renovation and Livelihood Assistance Project, aimed at rehabilitating transport and irrigation infrastructure, housing reconstruction, and restoring livelihoods. The affordable housing initiatives funded by the Government of India, which will benefit over 1,550 families across various regions, along with private sector investments in the Colombo Port City development, are anticipated to provide further support to the sector. Collectively, these initiatives are expected to position the construction industry for a potential return to double-digit growth.
However, considerable risks remain regarding the country’s fiscal progress. Maintaining the momentum of reforms and macroeconomic stability may prove increasingly difficult amid the geopolitical volatility tied to the Iran conflict, particularly due to rising energy prices. While higher fuel import costs and reduced tourism may widen the trade deficit, robust remittances from workers should help maintain external stability. Growing fiscal pressures could also limit the Government’s capacity to accelerate planned capital expenditures, potentially delaying the anticipated recovery in the construction sector.
Tokyo Cement adopts a cautious short- to medium-term outlook, yet remains confident in the underlying economic fundamentals of the country. With an enhanced production capacity of 4 million metric tons that is not yet fully utilized, the Group is well-positioned to seize future growth opportunities in the industry. Tokyo Cement is committed to maintaining strict cost discipline, protecting stakeholder interests, and actively contributing to the nation’s construction-led economic recovery.
