Tvornica Cementa forecasts FY12 double-digit declines

Tvornica Cementa Kakanj (TCK), the Bosnian unit of HeidelbergCement, expects to post a 10-14 per cent drop in cement sales this year as local market conditions and the impact of the Euro zone crisis continue to weigh on performance.

Speaking to SeeNews, the company’s general manager, Branimir Muidza, said that cement sales are seen at around BAM64m. "On the backdrop of the existing economic environment, our domestic sales volumes are seen flat in 2012 and would depend on the pace of construction activity which is currently lagging the year-ago mark by around 15%,“ Muidza said.

The situation on the Bosnian market is further compounded by an ongoing institutional crisis in the country that has put an additional dampener on foreign investment inflows, the official said, forecasting that domestic cement consumption this year would total around 1.1Mt, down 40% from the pre-crisis 2008 levels.

TCK exports around 12% of its production with the bulk going to the Croatian market. According to the latest company estimates, it currently operates at 60% of its production capacity and is expected to sell between 420,000 and 440,000tpa of cement.

Mr Muidza takes a cautious view on the market’s outlook, stating: “We hope that the planned projects for the construction of further sections in Bosnia of pan-European transport corridor Vc will soon get underway, providing a much needed shot in the arm to the local construction sector and a vital revenue stream for domestic businesses.”

Corridor Vc connects the Hungarian capital Budapest with the Croatian Adriatic port of Ploce via Bosnian territory.

In Muidza’s view, the country still needs to ease administrative regulation and speed up the award of building, environmental and other permits.

“The run-ins with redtape that we have as an investor on a daily basis simply make it impossible to conduct business activities and invest normally and also meet deadlines and return on capital targets.”

TCK currently has an annual production capacity of around 800,000t of cement. It is currently finalizing a major environmental project worth over BAM10m that was launched in 2010 involving the construction of a clinker storage silo that would negate the need for stockpiling clinker outdoors, thus reducing dust emissions.

Next year, the company plans to start another investment worth BAM3m to advance cement mllling and packaging operations.