Tokyo Cement poised for better growth, Sri Lanka

Tokyo Cement poised for better growth, Sri Lanka
Published: 07 February 2011

RAM Ratings Lanka, which has assigned long and short-term corporate credit ratings of A and P2 to Tokyo Cement Company (Tokyo) respectively, said this week that the company is poised to benefit from more construction activity in the country’s eastern region.

Though the group is exposed to the inherent cyclicality of the construction sector, which is the biggest consumer of cement, the long-term outlook for the construction industry is positive, RAM said in a rating statement.

The industry expanded 8.5% year-on-year in 1Q 2010 followed by another 9.3% in 2Q 2010. Further growth is expected to emanate from government-led infrastructure projects, particularly in the recently liberated northern and eastern regions of the country. “Given that Tokyo’s production facility is located in the eastern part of the country, we believe that it is well poised to benefit from such an upturn. Moreover, the improving macroeconomic environment is also expected to propel demand for housing over themedium to long term,” it added.

It said the ratings are supported by the group’s strong market position, healthy balance sheet and debt coverage levels. The ratings are however moderated by Tokyo’s dependency on the cyclical construction sector and inability to fully pass on cost increases to consumers.