Pakistan’s producers contend with soaring costs

 In the first nine months of the current financial year (9MFY22), Pakistan’s cement producers sold 40.8Mt of cement, down 2.5Mt or 5.8 per cent on the same period a year earlier. While local dispatches have remained stable at 36.1Mt, exports have fallen by 35 per cent.

With costs continuing to soar, domestic cement producers are reporting a mixed bag of results as the industry reels from the economic fallout of the pandemic and ongoing crisis in Ukraine. According to estimates by research house Topline Securities, total cement dispatches for FY22 are expected to come in at 54Mt, a decline of six per cent YoY, followed by 51Mt in FY23, a further contraction of five per cent YoY.   

In the 9MFY22 Lucky Cement posted an unconsolidated net profit after tax of PKR11.3bn (US$60.85m), down three per cent on the same period a year earlier. Despite sales expanding by 25 per cent YoY over the same period, raw material costs jumped 39 per cent while finance costs rose by 10 per cent. The company is currently expanding its capacity at Pezu (North) by 3.15Mta with major plant and machinery expected on site in the 1QFY23.   

DG Khan Cement Co reported unconsolidated net profit after tax of PKR3.6bn in the 9MFY22, an uptick of 27 per cent YoY. Over the same period, net sales advanced by 32 per cent to PKR43.29bn but administrative expenses leapt to PKR552m from PKR476m in the same period a year earlier, distribution costs increased, and taxation costs rose by 65 per cent.   

Fauji Cement Co saw its sales rise by 31 per cent in the 9MFY22 to PKR22.92bn with the company posting good results despite higher finance and taxation costs.   

Kohat Cement also saw a healthy surge in sales, rising by 32.4 per cent YoY to PKR23.58bn, resulting in an 83 per cent YoY increase in net profit after tax to PKR4.6bn. This comes despite distribution costs advancing from PKR58m to PKR85m and administrative costs expanding from PKR233m to PKR257m. Construction of the company’s greenfield cement production line in Khushab, Punjab, is reportedly progressing as planned.   

Cherat Cement saw its taxation costs jump by 62 per cent YoY in the 9MFY22 to PKR1.27bn. Net sales over the same period advanced by 23 per cent to PKR22.58bn, giving a net profit after tax of PKR3.4bn, up 55 per cent YoY. The company hopes that investments in new lines, equipment and renewable energy will not only improve operational efficiencies but also reduce costs.   

Garibwal Cement as seen its net profit after tax rise to PKR1.69bn, compared to PKR1.17bn in the same period a year earlier. Sales over the nine-month period came in at PKR11.45bn, up from PKR8.71bn in the 9MFY21, while administrative costs advanced from PKR281m to PKR363m.   

Improved selling prices in the local market resulted in Maple Leaf Cement’s consolidated turnover improving from PKR26.035bn in the 9MFY21 to PKR34.09bn in the same period a year later. Consolidated pretax profit advanced from PKR3.65bn to PKR5.79bn, while the consolidated tax component jumped from PKR805m to PKR1.46bn. Due to slower economic activity in Afghanistan, and the combination of high production costs and shipping costs, Maple Leaf Cement’s export volumes fell by almost 64 per cent in the 9MFY22 to 89,225t, compared to 243,493t in the same period a year earlier. A project to expand capacity at the company’s Line 4 has begun and is reportedly progressing as scheduled.