Quarterly Financial Review

Tokyo Cement Group (Tokyo Cement) reported a turnover of Rs. 12,544 million and a Profit After Tax (PAT) of Rs. 668 million for the 1^st Quarter ended 30^th June 2025, compared to a turnover of Rs. 11,665 million and a PAT of Rs. 707 million, in the same period last year. The growth in turnover was driven by a year-on-year volume growth and sustained industry momentum from the previous Financial Year, supported by the commencement of new construction projects.

The Economic Environment

The period under review commenced with trade-related uncertainty, as potential high tariffs on Sri Lankan exports threatened to erode foreign exchange reserves. Geopolitical tensions in the Middle East causing global fuel price volatility risks coupled with a marginal depreciation of the rupee, prompted an upward revision in local fuel and energy tariffs. However, a steady increase in foreign remittances compared to the previous year helped buffer the domestic economy from external shocks.

The International Monetary Fund (IMF) announced the successful completion of the fourth review of Sri Lanka’s Extended Fund Facility, unlocking immediate access to an additional USD 350 million in financial assistance. This milestone also paves the way for supplementary funding from the World Bank and Asian Development Bank.

Lower interest rates and improving macroeconomic stability continued to stimulate investment in real estate development and construction. Demand for credit facilities in both residential and commercial segments grew, supported by enhanced access to financing and lowered material costs.

A seasonal decline in cement consumption was observed in April due to the Sinhala and Tamil New Year, and again in May–June due to the South-West monsoons. However, delays in implementing public investment in key infrastructure projects continue to hinder the sector’s full recovery and anticipated growth.

Outlook

Industry optimism is expected to continue in the coming quarters, supported by subdued inflation and improved access to private sector credit. Sustained growth in foreign exchange inflows from tourism and remittances is expected to further stabilise the macroeconomic environment. However, sustaining the growth momentum depends largely on the Government’s ability to fast-track major capital investment projects, by securing foreign direct investment (FDIs) or financing from multilateral lending agencies.

Timely initiation of key infrastructure initiatives such as the BIA Phase II, and the resumption of the Kadawatha-Mirigama section of the Central Expressway, alongside other foreign-funded developments, is expected to drive the demand for cement and concrete.

Whilst stronger investor confidence is expected to support private sector investment, consumer demand could remain skeptical due to ongoing trade uncertainties. In response, both the World Bank and IMF have issued positive growth forecasts whilst alerting against potential policy slippages and slowdown of reform efforts. External variables led by resolution of recently imposed reciprocal tariffs and prudent management of vehicle imports will be critical in preserving macroeconomic stability and the hard-earned fiscal progress achieved to date. Tokyo Cement maintains a conservative short- to medium-term outlook but remains confident in the country’s economic fundamentals. The Group is prepared to capitalise on industry growth opportunities with its enhanced production capacity of 4 Mn MT, that is yet to be fully utilised. The Group continues to maintain strict cost control measures to safeguard its stakeholder interests and stands ready to be an active participant in the country’s efforts to reignite the economy.