Lucky Cement recorded the highest growth in local and export sales during the first quarter of this fiscal as compared to the last year’s first quarter among the cement manufacturing companies of the country.
The financial results of most of the cement-making companies have been announced and comparison of their performances shows that while average increase in the local sales of six major companies remained at 14 per cent, Lucky Cement registered a growth of 118 per cent - apparently on the back of its massive and timely expansion. It also recorded an impressive growth of 210 per cent in export sales.
Local dispatches of all the companies were on the higher side as compared to the corresponding period last year. Overall industry local cement dispatches soared by a significant 18 per cent, but interestingly enough, the hike did not prove sufficient enough to bring about a substantial upside in the sales value. One of the most obvious reasons, among many others, is that the local sale prices have considerably gone down as against the corresponding period in fiscal 2005-06.
Most of the major cement manufacturing companies reported less than last year earnings per share. Cherat Cement, DG Khan Cement, Maple Leaf Cement, Kohat Cement and Pioneer Cement were down by 52 per cent, 21 per cent, 77 per cent, 46 per cent and 94 per cent, respectively. However, EPS of Lucky Cement and Attock Cement grew by 39 per cent and 89 per cent, respectively.
Another point to note is that all the companies that failed to perform well on the export front, witnessed decline in their top line figures. Moreover, the local sales were adversely hit by the monsoon season, as the country received heavy showers in July and August, which forced a pause in the construction of buildings. It is expected that the sales would improve in the next quarter, said a report prepared by Zuhair Abbasi and Umer Bin Ayaz, analysts at Capital One Equities.
Moreover, the cost of production remained on the higher side, on the back of ever increasing coal and furnace oil prices in the international market. The combined effect of lower sales prices and soaring cost of sales eventually resulted in low gross margins for most of the players, analysts said.
However, those companies whose export sales were higher were not badly hit by the increased cost of production, as the export sales promise much higher margins than the local sales.
In addition, the towering financial charges of many major players were also an important factor behind the low bottom line figures. The evident reason for such high financial costs is that most of the companies went for expansions, for which long-term financing has been raised.
Analysts said they believed that the export potential is going to be the chief contributor to companies’ sales performances as the higher export margins would play a vital role in offsetting the negative impact on the gross margins due to higher cost of production coupled with stable local cement price expectations.