Pakistan: 13% YoY surge in cement sales boosts producers' profits

Pakistan: 13% YoY surge in cement sales boosts producers' profits
11 May 2016

Pakistan's cement industry's profit rose 30 per cent to PKR45.169bn (US$431.6m) in the first nine months of the current fiscal year as there was a surge in sales, supported by soft oil and 11-year low coal prices, according to the Topline Securities Ltd brokerage.

In the July-March period of the last fiscal year, the local industry earned PKR34.847bn. The profitability growth was supported by 13 per cent YoY growth in sales as a result of higher local dispatches, firm local pricing, 802 basis points increase in gross margin to 40.9 per cent and 16 per cent decrease in selling and distribution expenses, said Topline Securities analyst Nabeel Khursheed.

The brokerage assessed the financial results of 15 cement markers, out of 19 players, representing almost 100 per cent of the industry's market capitalisation. The report said the industry's profit grew 26 per cent to PKR16.303bn in the third quarter (Jan-March) of 2015-16 on the back of 20 per cent increase in local dispatches and rise in gross margins.

Rising local volumes, stable local pricing and declining input costs (coal prices near 11-year low and falling power tariff) are likely to support margins of cement manufacturers, Mr Khursheed said.

"We downplay any risk of a price war amongst cement manufacturers as the industry is already operating at around 85 per cent of capacity utilisation. If the local industry continues to grow at the same pace, we expect demand to outpace supply in the near future," he added.

The brokerage report said local demand was strong because of a rise in housing projects and start of China-Pakistan economic corridor projects. Cement sales increased 9.93 per cent to 28.34Mt YoY for the period July-March 2015/16. Local dispatches rose 18 per cent to 24Mt and cement exports fell 19 per cent to 4.406Mt in period under review.

Published under Cement News

Tagged Under: profit Pakistan