Cement sector profitability up 82 per cent

Cement sector profitability up 82 per cent
Published: 06 March 2006

During the first half of the current financial year the profitability of local Pakistani cement companies maintained its upward track with higher demand, price increment and decline in cost of production with investment on cost efficiency by the manufacturers. The cumulative profitability of most cement companies that has announced their half-year financial results stood at Rs 5.81 billion, depicting a massive growth of 82 per cent over first-half of the previous financial year 2005 with combined profits of Rs 3.20 billion.

Atif Malik, an analyst at Jahangir Siddiqui Capital Markets, said cement companies, in line with their consecutive three years of positive earnings’ growth, from financial year 2003 to financial year 2005, during their recently announced half-year results, continued with their upbeat performance. “Thanks to double-digit growth in demand, regular increase in cement prices and cost efficiencies done by the manufacturers,” he said.

Net sales grew handsomely by 44 per cent mainly due to increased cement dispatches and rising prices, whereas gross profits depicted an 80 percent growth on the back of better retention prices and cost efficiencies. Profit-before taxes, depicted a massive increase of 95 percent. However, profit after tax growth rate was less at around 82 percent. This is mainly due to lower effective tax rate during the first-half of the financial year 2005.

It is expected that the sectors’ profitability would further grow on the back of anticipatory further increase in cement prices and upbeat demand. For the financial year 2007 and financial year 2008, however, profits are expected to stabilize due to the fact that new capacities that will come online during these two years.