Pakistan cement sector reports fall in earnings

Pakistan cement sector reports fall in earnings
Published: 11 November 2009

The Pakistan cement sector recorded a nine per cent drop in profitability for the first quarter of the year ended September. Aggregate profit after-tax of almost all units combined stood at PKR1,030 for 1QFY10, compared to Rs1,131 million in the corresponding three months of the previous year.

Cement units located in the North were seen to have endured bigger loss of Rs71 million, compared to losses at Rs39 million in the same time last year. Units in the South continued to contribute earnings but those were sharply reduced by 87 per cent to Rs28 million.

‘The cement sector faced a myriad of issues most notably the breakdown in pricing arrangement, leading to price reductions on the domestic front,’ says Ayub Ansari, sector analyst at Invest & Finance Securities. The study of cement sector performance included 17 companies, representing 95 per cent of the total sector market capitalisation.

The zonal analysis excluded Lucky and Dewan from the sample since both had plants in both the zones. Analysts said that breakdown in pricing arrangement represented itself in reduced gross profit. Gross profit of the cement sector declined 19.5 per cent to Rs6,917 million for the quarter under review, from Rs8,591 million in the similar period of 2009. Gross profit margin shrank by 5.24 per cent to 24.18 per cent from 29.42 per cent.