Dewan Cement's profitability dented due to high power costs in 9MFY23-24

Dewan Cement recently submitted its 9MFY23-24 report with the unaudited financial results for nine-month period that ended 31 March 2024 to the Pakistan Stock Exchange (PSX) for shareholders’ information. During this period, the company posted a loss of PKR601m (US$2.16m) against a loss of PKR758m, despite an increase of 12.9 per cent in sales during the new month’s period.

The report adds that overall development activity and price hikes favourably impact sales revenue. However, the cost of sales increased by 14.6 per cent compared to last year’s corresponding period. The major portion of this increase has been caused due to a 42 per cent hike in power cost while coal prices were upby five per cent. In addition to these factors, inflation and Pakistani rupee devaluation have an unfavourable impact on the overall cost of production.

Outlook

In review reports, top officials added that the slowdown in the domestic cement market results from various factors, such as record inflation and a high interest rate of 22 per cent. The industry is currently also facing challenges with rising construction costs. Consequently, cement demand has declined despite initial predictions of a rise in construction projects.

A significant observation is the increase in cement exports, which can be attributed to the adjustments made in profit margins due to the devaluation of the domestic currency. Although there have been attempts to enhance production capacity in preparation for upcoming construction ventures, achieving full capacity utilisation has been challenging. 

The industry is optimistic about the potential for growth under the new government. Stakeholders hope the government will tackle the challenges in the cement sector and establish a favourable environment for continuous progress. Political stability, expected decreases in interest rates, and a steady local currency are anticipated to boost investor confidence. This, in turn, will stimulate economic and construction activities required to strengthen local dispatches.