1QFY23-24 is a good omen for Pakistan’s cement industry

Pakistan’s cement industry saw healthy growth in profit after tax (PAT) between July and September 2023 (1QFY23-24) on the back of a 32 per cent YoY advancement in sales, according to Spectrum Securities Ltd, which evaluated the results of the top nine cement makers enrolled at the Pakistan Stock Exchange (PSX), representing 93 per cent of the sector’s market capitalisation.

The top nine, which represent 93 per cent of the sector's market capitalisation, saw a 33.3 per cent growth in aggregate profits in the accounting period, according to analysts at Spectrum Securities. The bottom line of the sample companies posted PAT to the tune of PKR20bn (US$70.76m) in 1QFY23-24 compared to PKR15bn in the year-ago period.

Experts believed that the build-up in the profitability of the companies is mainly attributed to a 32 per cent YoY increase in topline, due to a 23 per cent YoY increase in dispatches and a 12 per cent YoY increase in sales prices, increase in other income by 65 per cent YoY and a massive decline in coal prices headed the gross margins.

The cement prices improved by 12 per cent YoY, and a substantial decline in coal prices of 66 per cent led to the gross margins growth. Selling and distribution expenses grew by 59 per cent YoY, owing to higher fuel prices aided by mounted transportation costs. Other income improved by 65 per cent as healthy dividends from associated companies increased to PKR5.3bn from PKR3.3bn. The additional expenses of sample companies increased by 59 per cent YoY to PKR3.1bn.

Average coal prices (Richards Bay) stood at US$109/t in the 1QFY23-24 compared to US$325/t in the same period last year. At the same time, the average US$/PKR parity clocked in at PKR290/US$ in 1QFY23-24 versus PKR223/US$ in 1QFY22-23.