Pakistan: cement producers see profits of 12% 1QFY16/17

Pakistan's cement manufacturers posted 12 per cent growth in their profits during the first quarter of the current fiscal year of 2016/17 on high sales and low financial cost, acocording to a Topline Securities research report.

An analysis of 15 out of a total of 19 listed manufacturers, representing 95 per cent of cement companies’ market capitalisation, the profitability of the sector grew to PKR13.6bn (US$127.9m) during the quarter.

Analysts attribute this boost to a 10 per cent YoY increase in sales, which climbed to INR58.3bn and lower financial charges, which came down by 40 per cent YoY basis in 1QFY17. Heavy local cement demand (up by 10 per cent YoY basis in 1QFY17) kept the sales on the higher side, the report said.

"Cement sales would have been higher than this, had there not been a change in property taxation/valuation in Budget FY17.," the report said adding analysts believe a pick-up in China Pakistan Economic Corridor (CPEC) related activities should drive local demand in the long run.

However, in Budget FY17 the government amended property taxation/valuation mechanism, which affected real estate projects/activities, which is one of the drivers of local cement sales. Although profit before tax grew by 16 per cent YoY basis in the period under review, an increase in  tax rate restricted net earnings growth to 12 per cent YoY.