Pakistan: FY16 earnings up 16% YoY

Pakistan cement industry performed well in FY16 and concluded on a positive note for the cement sector with earnings clocking in at PKR36.4bn (US$348.3m), up 16 per cent YoY.

According to research house, the growth in earnings was backed by eight per cent YoY increase in revenue amid higher dispatches, increased in margins due to lower fuel and power costs and 54 per cent YoY decline in finance cost. However, 6.6 per cent YoY increase in effective tax rate due to increasing share of local sales in the sales mix of the industry and depleting tax losses limited the overall growth in earnings.

The total cement dispatches of the industry registered an increase of 9.8 per cent YoY to 38.9Mt in FY16 compared to 35.4Mt in FY15. Local dispatches were up 17 per cent YoY to 33Mt compared to 28.2Mt. This propelled industry revenues by eight percent YoY to PKR136bn.

However, 18.4 per cent YoY decline in exports restricted the overall growth in dispatches. On sequential basis, revenues reported a meager growth of 1.4 per cent QoQ to PKR36.0bn against PKR35.5bn reported in the preceding quarter.

Industry margins are expected to taper off in FY17 since commodity prices have increased from their lows in FY16 where furnace oil and coal prices have increased 15 per cent QoQ and 21 per cent QoQ, respectively.

However, consistent demand growth in the country, expected at 15 per cent YoY in FY17 will now be the prime earnings driver for the industry. The demand outlook further strengthens as first major financing tranche of US$700m was released by China Development Bank for development expenditure on infrastructure programme.