Reconstruction efforts to boost pretax profits

Reconstruction efforts to boost pretax profits
Published: 06 June 2011

Post-earthquake reconstruction demand is expected to boost pretax profits at four major cement firms by a combined JPY33bn (US$411m) over the next five years.

Assuming that their market shares remain the same, reconstruction demand will push up pretax profits by JPY15bn at Taiheiyo Cement Corp, JPY8bn at Sumitomo Osaka Cement Co, JPY5bn at Mitsubishi Materials Corp and JPY5bn at Ube Industries Ltd.

The Japan Cement Association estimates that 10Mt of cement will be used for reconstruction projects. The figure was arrived at based on damages estimated by the Cabinet Office and how cement sales increased in the aftermath of the 1995 Kobe quake. The trade group believes reconstruction will take about five years. Cement firms each book an operating profit of JPY4,000/t of cement sold. Taiheiyo Cement controls almost 40% of the market in Japan’s northeastern Tohoku region.

Reconstruction demand will push up the firm’s cement sales by nearly 4Mt, translating to a JPY3bn contribution to pretax profit annually for the next five years.