Pioneer Cement coal mix strategy impacting positively

Pioneer Cement Ltd (PIOC), which had a market capitalisation of US$110m on 8 March, will see healthy growth in profit and dividend yields, according to AKD Research. This is based on the company's past performance and steps taken to improve margin.

The research house believes that improved fuel mix results may increase profitability. PIOC has exceeded market expectations, with a drop in coal prices and an increase in local coal in the fuel mix, resulting in gross margins expanding to 32.6 per cent in 1HFY23-24 compared to 25.3 per cent in the same period last year. This expansion is particularly noteworthy as approximately 40-45 per cent of the company's power reliance is on coal-fired power plants. Additionally, the company's focus solely on local sales is beneficial, as exports typically yield lower margins.

Moreover, PIOC has significantly reduced its debt and refinanced its borrowings to lower mark-up loans. This refinancing has led to a decline in the company's finance costs by 11 per cent YoY in 1HFY23-24 despite higher effective interest rates. 

Pioneer Cement plant at Khushab in Punjab has a production capacity of 5.455Mta.