Mixed pattern in financial results visible in 9MFY20

Mixed pattern in financial results visible in 9MFY20
27 April 2020

Three more Pakistani cement companies have announced their 9MFY19-20 financial results. Lucky Cement Ltd has reported a lower profit, while Maple Leaf Cement Factory Ltd (MLCF) and Bestway Cement Ltd have reported losses during this financial period. The obvious reason is attributed to increase in cost of sales alongside other unavoidable negative business factors.
Lucky Cement
Lucky Cement reported that with the current economic challenges due to COVID-19 and post relaxation lockdown in the north, dispatches have reached 80 per cent of pre-lockdown volumes. Dispatches in the south, however continue to suffer due to lockdown in Sindh province and are at one third of normal volumes, and are expected to remain under pressure due to low economic activity.

Export volumes are also very thin due to low demand from foreign buyers. Based on the demand projections in the north and the fact that the majority of players are presently operating in losses, management expects that the prices in the north will recover. In the south, due to lower economic activity as a result of COVID-19 lockdown, volumes will remain under pressure.
However, once the pandemic situation eases, Lucky Cement also expects that the package announced for the construction industry by the Federal Government will have a positive impact on the cement demand of the country.
Lucky Cement Ltd on a consolidated basis, reported net profit after tax of PKR2.936bn (US$18.28m), posting a 65 per cent decline from the same period last year. The decline in profit is attributed to a fall in sales, which plummeted by 13.5 per cent to PKR32.44bn during this period from PKR37.52bn in the year-ago period. The cost of sales also jumped six per cent to PKR27.92 during the nine months ending 31 March 2020.
It also reported a higher distribution cost of PKR2.93bn against PKR882m in 9MFY19, however,  administrative expenses slid to PKR923m from PKR2.10bn in the corresponding period last year.
The company's overall sales volume declined 2.6 per cent to 5.8Mt during 9MFY20 compared to 5.9Mt in same period last year. This decline was mainly driven by a seven per cent dip in local sales, due to higher competition from commencement of new capacities.
Lucky Cement reported progress on its greenfield investment project to produce 1.2Mt of clinker at Samawah, Iraq, and its 660MW supercritical coal-based power project at Port Qasim.
Commercial operations of the brownfield expansion of 2.8Mt in Pezu, Pakistan, commenced in December 2019. This has enhanced the company's capacity to 12.2Mt, with capacity-based market share of 17 per cent (Lucky Cement has become the largest cement manufacturer in Pakistan).
Maple Leaf Cement Factory
Maple Leaf Cement Factory Ltd posted a net loss of PKR3.732bn during the 9MFY20, against earnings of PKR1.150bn recorded during 9MFY20. The loss is attributed to an increase in the cost of sales, which rose by 60 per cent to PKR23.39bn from PKR14.62bn in the year-ago period. The cost of sales even surpassed the total revenue of PKR23.09bn.

It also reported a higher distribution cost of PKR630m against PKR607m in 9MFY19, while administrative expenses were higher at PKR565m compared to PKR515m in the corresponding period last year. The financing cost also jumped to PKR2.40bn from PKR724m.
Bestway Cement
Bestway Cement Ltd (BCL) reported a net loss of PKR19.9m against profit of PKR9.53bn in the 9MFY19. The loss in profit is due to a fall in sales, alongside an increase in sales tax, excise duty, and a rise in financing costs. The total revenue stood at PKR48.77bn. However, both distribution costs and administrative expenses fell to PKR633m against PKR1.083bn and PKR416m from PKR567m, respectively.

Published under Cement News