Reporting the annual results for Turkish cement producer Adana Çimento opened up an issue familiar from many of the international big players' annual reports last year: currency fluctuations.
The conversion rate between the US dollar and the Turkish lira rose from US$1 to Turkish lire 1.55 at the end of 2010 to US$1 to Turkish lira 1.89 at the end of 2011. This created the alarming situation where the company's annual sales rose by 3% from 2010 to 2011 if you measured it in Turkish lira, but fell by 15% if you measured it in US dollars!
Great news for currency speculators playing with so-called 'hot money' but not so great for manufacturers seeking stable trading conditions. As for the company's shareholders, if they are paid their dividend in Turkish lira then it's the value of the lira that is important. If the shareholders have to change Turkish lira into their own 'foreign' currency in order to spend it (or keep it in the bank), into dollars for example, then that's when they could lose out.
This is particularly bad news for a country like Turkey with its strong export market. Although looking at the nation's top export destinations in 2010 reveals a roll call of instability, including Iraq, Syria, Libya and Egypt. Regardless of the price, these countries are going to need cement when the dust settles from ongoing political turmoil, something we also cover in another story this week with reports of striking at Egyptian plants. Cement isn't likely to be coming from Saudi Arabia though, which we see is enjoying demand driven by government-funded construction projects.
Elsewhere this week we have stories on the impact of the Indian Budget on the cement industry, yet more Dangote projects in Cameroon and Liberia and promising signs from Taiheiyo in Japan.
