Cherat Cement Company chairman Mohammed Faruque, Chairman released the company’s nine monthly report for the period ended March 31, 2007. On the back of an impressive expansion in domestic demand, the company’s sales volumes rose to 666.9Mt compared to 423.3Mt in the previous nine months period of FY 2006-07 (9M M05-06) representing an increase of 57.5%. However with the massive increase in the production capacity of the industry the selling price of cement went down, which adversely impacted the company’s financial result.
During the period under review the company earned an after tax profit Rs 156.18m against net sales of Rs 1,898.67 million compared to an after tax profit of Rs 441.17 million against net sales of Rs 1,703.44 in the corresponding period last year. The company net turnover increased by 11.5%, net profit declined by 65%.
The effect of depressing selling price is manifest in the fact that sales in terms of volume shot up by 57% whereas sales in terms of value rose at comparatively lower growth rate. One can also see the effect of depressing sales price from gross profit ratio to net sales gross margin. In this case gross margin in 9M M06-07 was lower at 17.28 percent whereas in the previous corresponding period it was much higher at 44.47 percent. The Chairman enumerated a number of factors which affected the gross margin such as depressed cement prices owing to large scale increase in production capacity of the industry and "Undue Govt Pressure" and higher production cost due to rise in fuel prices.