During the first half of FY24-25, Thatta Cement Co Ltd’s revenue increased by 23.2 per cent compared to the previous year, reaching PKR3.849bn (US$13.8m), according to the company's interim report. This growth followed a 12.3 per cent rise in sales volume, driven by improved local sales and higher retention prices. The cost of sales rose by only 7.5 per cent in 1HFY24-25, thanks to the company’s cost optimisation strategies, including the installation of a 5MW solar power plant. Therefore, gross profit saw an 81.7 per cent increase in 1HFY24-25 compared to the same period last year.
The gross profit margin improved from 21.16 per cent in 1HFY23-24 to 31.21 per cent in 1HFY24-25. Distribution expenses grew by 11.6 per cent in 1HFY24-25, primarily due to increased sales volumes, which resulted in higher freight charges. In contrast, administrative expenses decreased by 12.7 per cent during the same period. A significant rise in profit-related provisions led to a 170.9 per cent spike in other expenses in 1HFY24-25. However, this increase was fully offset by a 333.3 per cent increase in other income for the company in 1HFY24-25. This higher other income resulted from a royalty reversal of PKR150.84m, following a downward revision in the prices of limestone and shale clay by the Department of Minerals and Mines, Government of Sindh, which allowed for the reversal of excess royalty provisions.
Thatta Cement Co reported a 163.8 per cent increase in operating profit in 1HFY24-25, achieving an operating profit margin of 45.5 per cent, compared to 21.2 per cent in 1HFY23-24. Finance costs decreased by four per cent during this period due to monetary easing. Net profit surged by 214.9 per cent to PKR1.127bn in 1HFY24-25, with earnings per share (EPS) reaching PKR13.31, up from PKR3.64 in 1HFY23-24. The net profit margin also saw a substantial improvement, rising from 11.5 per cent in 1HFY23-24 to 29.3 per cent in 1HFY24-25.
Outlook
With improvements in the macroeconomic environment, cement demand is expected to gradually recover. However, overall dispatches for FY24-25 may remain low due to reduced Public Sector Development Program (PSDP) disbursements. Additionally, the increasing capacities of cement facilities over the years, combined with weak demand, have led to a significant demand-supply gap. In such a scenario, it remains uncertain whether the cement sector can sustain high retention prices in the long term.
During 1HFY24-25, Thatta Cement Co acquired 12.5m shares of Thatta Power (Pvt) Ltd (TPPL), resulting in a revised ownership stake of 88.5 per cent. This acquisition will provide Thatta Cement Co with better control over TPPL’s operations. Furthermore, Thatta Cement Co has invested in Minsk Work Tractor & Assembling (Pvt) Ltd. These diversified investments are expected to create new avenues for alternative income for the company.
by Abdul Rab Siddiqi, Pakistan