Pakistan cement sector 1Q earnings rise 14%

Pakistan's cement sector earnings rose by 14 per cent in the first quarter of the current fiscal with nine of the country's leading producers posting higher growth.

Lucky Cement, DG Khan, Fauji Cement, Maple Leaf Cement, Attock Cement, Pioneer Cement, Cherat Cement, Kohat Cement, Facto Cement together constitute 68 per cent of the sector’s market capitalization.

Analysts at JS Research attribute the increased profitability to increasing margins and a reduction in financial costs due to deleveraging.

Cost pressures were limited, with the cost of sales rising by only six per cent YoY due to lower coal prices (-17 per cent YoY). As a result, the cement sector’s margins expanded to 36 per cent compared to 35 per cent in the same period of last year, while financial costs were down 22 per cent.

Fauji Cemet topped the performance charts with growth of 59 per cent YoY, followed by Kohat and Maple Leaf (+52 per cent, each). Lucky Cement also reported impressive growth of 26 per cent YoY due to an improvement in gross margins and lower distribution costs. DG Khan and Cherat Cement posted the lowest growth in the sector, with rises of two per cent each.

Cement sales update
Meanwhile, the All Pakistan Cement Manufacturers Association (APCMA), reported that  during October 2013 Pakistan cement sales were 2.65Mt, down four per cent YoY and 10 per cent MoM to 2.65Mt. As a result, cement sales for the first four months of the current fiscal have remained relatively flat  at 10.45Mt at (-0.3 per cent YoY). The October decline was due to fewer working days in the month.  Analysts expect demand to catch up somewhat in November 2013 and will  impact  positively on company margins.