Pakistani cement producer Maple Leaf Cement Factory Ltd (MLCF) is expected to be on track to record its highest net profit in six years on improved price realisation and lower interest rates reducing loan payments.
Rising prices are helping local cement makers to deal with sluggish sales. In the four months ended 31 October, national sales were 1.5% down to 13.4Mt, according to the All Pakistan Cement Manufacturers’ Association. The average price of a 50kg bag could increase to PKR440 by June, after rising 20% to PKR421 in the last financial year.
“This year is going to be a good one for Maple,” said Sateesh Balani, a research analyst at Elixir. “Even a modest capacity utilization level of 70 percent will help the company make good earnings on the back of strong cement prices.”
Maple Leaf plans to reduce its debt to PKR13bn (US$135m) in the year ending June. Since 2005, the company has expanded, owing PKR16bn to banks. Lower interest rates have contributed to lower financial charges after the central bank reduced borrowing costs for a second time.
In addition, domestic cement sales are forecast to rise by 5% by the end of the current financial year as President Asif Ali Zardari’s administration boosts public spending ahead of general elections early next year. Moreover, MLCF’s Mianwali plant, Punjab, is well-positioned to benefit most of the improved Pakistan-India trade.
