Cement producers have started posting their financial results on the Pakistan Stock Exchange (PSX) for 4QFY22-23 and the full year of 2023. Mixed results are expected, yet Spectrum Research has stated that higher financial costs and super tax reduce profitability.
It adds sluggish economic activities, leading to a decline in the country’s construction materials demand, mainly cement and steel. The higher inflation and low purchasing power also contributed to a reduction in cement dispatches. Moreover, the higher interest rate and depreciation in the Pakistani rupee are increasing the manufacturing cost, thus reducing the sector’s bottom line.
The cement sector is anticipated to maintain its topline, but due to increased finance costs and taxes, the earnings of the big cement players are expected to decline. The gross margin of the main players is likely to clock in at 25 per cent in 4QFY22-23, as compared to 24 per cent in the preceding quarter, merely increasing by one per cent QoQ. This is due to the decline in coal prices along with an increase in cement bag prices in both south and north regions, and therefore leading to improve gross margins.
The decline in local cement volumes can be attributed to a significant rise in construction costs due to import restrictions on essential construction materials. Additionally, exceptionally high inflation rates have eroded savings and elevated interest rates have amplified the costs of housing financing.
