Better capacity utilisation improves financial result of 1QFY23-24

Pakistani cement producers listed in the Pakistan Stock Exchange (PSX) have yet to post their financial results for the first quarter of FY23-24 (July-September 2023). Yet, Topline Pakistan Research believes that their profitability will increase by 40 per cent YoY in the 1QFY23-24 due to increased cement dispatches and improved gross margins during this first financial quarter.

Net sales are anticipated to grow by 28 per cent YoY to PKR89bn (US$322.27m) in the 1QFY23-24 primarily due to 18 per cent YoY growth in local cement sales and a 12 per cent YoY increase in average cement prices.

Topline Pakistan Research assumed that the surge in cement dispatches could be attributed to the low base effect of last year amid floods, economic stability, improved farmer’s income and 72 per cent YoY surge in exports due to significant currency devaluation.

Moreover, capacity utilisation of the cement sector reached 60 per cent in 1QFY23-24, compared to 52 per cent in 1QFY22-23.

During the outgoing quarter, cement players in the southern region began using Richards Bay coal, while those in the northern region used a combination of Afghan and local coal. Richards Bay coal prices averaged US$109t in 1QFY23-24 compared to US$324/t in 1QFY22-23 and US$115/t in 4QFY22-23, down 66 per cent YoY and 5 per cent QoQ – a lead factor on improving margin.