The effects of the South East Asian economic crisis and the resulting currency devaluation has not been totally negative as far as Sri Lanka is concerned with imports from the region becoming cheaper.

One beneficiary has been Tokyo Cement Co, Ltd., which together with its recently commissioned subsidiary, Fuji Cement, expects to soon become the country's leading cement producer. Tokyo imports all its clinker requirements from Thailand and the baht devaluation had made such imports cheaper. This has enabled the company to make a ten-rupee price cut per 50-kg. bag of cement from May but still improve its margins from a year earlier, a recent John Keells research report said.

Despite 53% of the country's current cement requirement being imported, the local preference is for cement manufactured here, Tokyo Cement Chairman A.Y.S. Gnanam has said in his company's recently released annual report.

Tokyo, which claims a 15% market share for its product, expects that with the commissioning of Fuji Cement, its fully owned subsidiary, that they would become the country's largest cement manufacturer and reduce the market's dependence on imported cement.

Gnanam has identified the Colombo - Matara super highway, the Galle harbour development and the Colombo harbour expansion among the major projects that will get off the ground shortly. Taking these into account, the demand for cement is expected to grow 6.8% annually with Sri Lanka needing 6.6 million m.t. of cement a year by the year 2000. Local production which is projected to grow 18% per year will reach 1.6 million m.t. by then, Gnanam said.

"Tokyo Cement with its subsidiary, Fuji Cement is poised to extend its production capacity to meet the market demand,'' he said. "We are certain that by the year end Tokyo and Fuji will be able to extend its production capacity to meet an increased market segment.''

In its most recent analysis of the company, a John Keells research report said that Tokyo had reduced its selling price by Rs. 10 a 50-kg. bag from end May. This had marginally eroded the company's turnover for the first quarter of the current financial year overriding the benefits of volume gains during the period.

However, Tokyo which imports all its clinker from Thailand has benefited from the devaluation of the Thai baht and has been able to increase its trading margins despite the reduction in the selling price. These margins had expanded to 18.5% from 10.2% a year earlier, the report said.

Gnanam reported that Tokyo's turnover had increased 15% during the year ended March 31, 1998, to hit Rs. 1.73 billion. This had helped the company to post an after tax profit of Rs. 164 million, up from Rs. 109.7 million a year earlier.

Reviewing the year, the company's joint managing directors, Messrs. S.R. Gnanam and T. Abe, have said that productivity at their plant had improved to 312,627 m.t. of cement from the previous year's 269,802 mt. They regarded this performance that boosted net profits 76% before providing for deferred taxation as "quite creditable in view of the diminution of construction during that year.''

They said that the commissioning of a new state-of-the-art German bagging machine has increased the plant's bagging capacity to 120 tons of cement per hour. The consequent increase in productivity would "naturally improve profits.''

The joint MDs complained that the existing tariff structure gave bulk cement importers an advantage over manufacturers. They argued that this would encourage the setting up of bagging plants rather than cement mills as such a plant cost only a fraction of what a fully integrated cement mill costs.

"Bulk cement entrepreneurs have at present 25% of the local cement market. On the basis of new approvals that are being given this would increase to 40% of the entire market. Tariff concessions that have been given to bulk importers have been effected without any assessment of the market or the macro-economic conditions of the country,'' they complained. "We urge the government to review this situation seriously.''

Gnanam and Abe said that Tokyo which expected to produce 400,000 m.t. of cement during the current financial year expected to improve profitability by 30% if last year's market conditions prevail. With their BOI-approved subsidiary, Fuji Cement, now commissioned enjoying a 10-year tax holiday, shareholders of Tokyo Cement can expect a higher net income from their investment, they said.

The directors of the company are Messrs. A.Y.S. Gnanam (chairman), S.R. Gnanam and T. Abe (joint managing directors), M. Radhakrishnan, C.J.E. Anthonisz, E. Gunatunga, S.V. Wanigasekera, C. Takahashi, K Sekiya and T. Miyake.