According to Fecto Cement Ltd 's newly-released 1HFY24-25 report, the company's overall domestic sales volume declined by 14.2 per cent when compared with the 1HFY23-24, which has been partly offset by export volumes growing exponentially at 2.8 times the level reported in the 1FY23-24, resulting in an overall decline of around 10.8 per cent.
As a result of subdued demand, cement production during the half-year was 339,197t, down 11.7 per cent YoY. Overall cement capacity utilisation fell to 68 per cent from 76 per cent in the corresponding period of the previous year. The cost of sales decreased by 11.6 per cent YoY. Fuel and power cost declined by 12.1 per cent, mainly driven by a 15.6 per cent decrease in coal charges. Stores and spares consumed and salaries and wages increased by 18.6 per cent and 31.1 per cent, respectively, mainly driven by inflationary trends.
Administrative costs increased from PKR182.602m (US$0.652m) to PKR230.881m, or 26.4 per cent, and distribution costs increased from PKR55.123m to PKR66.660m, or 20.9 per cent, over the corresponding period last year. The increase in salaries and wages contributed significantly to this increase.
Active working capital management and a reduction in borrowing levels due to the retirement of term loans have reduced financial charges by 16.7 per cent YoY.
In the 1HFY24-25 the company achieved a profit before levies and taxation of PKR827.402m and a profit after tax of PKR470.870m, compared to PKR424.715m and PKR178.503m, respectively in the 1HFY23-24.
Outlook
As the company moves into the second half of the financial year, Fecto Cement remains optimistic about the future, bolstered by encouraging economic indicators. The recent reduction in the State Bank of Pakistan’s (SBP) monetary policy rate and the Karachi Interbank Offered Rate (KIBOR) is anticipated to positively impact the overall business environment. Lower borrowing costs should significantly relieve financial charges, enhancing profitability and liquidity for businesses, including the cement sector.
Fecto Cement's strategy will continue to focus on the export market to mitigate any adverse impacts on domestic volumes. However, it acknowledges the volatility in input costs, particularly coal prices, which could pose challenges. The company proactively implements operational efficiencies and cost optimisation measures to manage these fluctuations.
Two company directors reported that the ongoing capital expenditure project to enhance product quality will be completed this year. This project is expected to strengthen its market position further and reinforce its commitment to delivering superior products to customers.
By Abdul Rab Siddiqi, Pakistan
