Fecto forms new subsidiary, reports fall in domestic sales

Fecto Cement Ltd has approved the formation of a wholly-owned subsidiary to implement the investment in a new cement plant.

The Pakistani cement producer had earlier announced plants to build a 6000tpd greenfield plant and 9MW waste heat recovery power plant in Palai, Khyber Pakhtunkhwa. Completion of the project would be expected in 18 months’ time.

Financial performance 1QFY19-20
In the first quarter of the 2019-20 financial year, Fecto Cement increased its clinker production by 10.4 per cent, but cement output fell by 9.8 per cent YoY. Company sales fell 10.9 per cent YoY, mainly due to a 17.3 per cent drop in domestic sales. Export sales were 49.5 per cent up YoY in the first quarter.

Gross local sales revenue declined by 19.9 per cent YoY to PKR1203m (US$7.8m) when compared with PKR1502m in the previous year’s first quarter. Net local sales revenue was down by 26.6 per cent YoY to PKR741m (1QFY18-19: PKR1010m).

Export revenues advanced 66.2 per cent to PKR155m in the 1QFY19-20 when compared with PKR93m in the year-ago period. The depreciation of the Pakistani rupee against the US dollar was the main driver for the improved export figures.

A reduction in domestic selling prices coupled with an increase in cost of production due to various factprs, led to a reduction in gross profit for the period to PKR12m against PKR134m of same period in the previous year. The increase in distribution costs was due to higher export sales volume resulting higher dealers' margins. The company reported a loss before tax of PKR-72m and loss after tax of PKR-53m for the period when compared with a profit before tax of PKR43m and profit after tax of PKR37m of same period last year.

While the off-take of cement increased from plants located in north fierce competition has resulted in a significant reduction in prices, which considerably affects the profitability of the industry. The rise in production costs due to multiple cost factors is also hampering the overall growth of the industry. These factors, coupled with slowdown in economic activities due to measures taken by the government to curtail current account and fiscal deficit, have also affected the industry. Depreciation of rupee against USD is expected to improve exports.