Cement industry’s profit surges 30pc in July-March

KARACHI: Cement industry’s profit rose 30 percent to Rs45.169 billion in the first nine months of the current fiscal year as there was a surge in sales, supported by soft oil and 11-year low coal prices, during the period, a brokerage said on Monday. 

In the July-March period of the last fiscal year, the local industry earned Rs34.847 billion, said Topline Securities Limited. 

“The profitability growth was supported by 13 percent year-on-year growth in sales as a result of higher local dispatches, firm local pricing, 802 basis points increase in gross margin to 40.9 percent and 16 percent decrease in selling and distribution expenses,” said analyst Nabeel Khursheed at Topline Securities. 

The brokerage assessed the financial results of 15 cement markers, out of 19 players, representing almost 100 percent of the industry’s market capitalisation.

The report said the industry’s profit grew 26 percent to Rs16.303 billion in the third quarter (Jan-March) of 2015/16 on the back of 20 percent increase in local dispatches and uptick in gross margins. 

“Rising local volumes, stable local pricing and declining input costs (coal prices near 11-year low and falling power tariff) are likely to support margins of cement manufacturers,” Khursheed said. “We downplay any risk of a price war amongst cement manufacturers as the industry is already operating at around 85 percent of capacity utilisation. If the local industry continues to grow at the same pace, we expect demand to outpace supply in the near future.” 

The brokerage report said local demand was strong because of a rise in housing projects and start of China-Pakistan economic corridor projects.

Cement sales increased 9.93 percent to 28.34 million tons year-on in July-March 2015/16. Local dispatches rose 18 percent to 24 million tons and cement exports fell 19 percent to 4.406 million tons in period under review.