Cement companies' profits rise 17% to Rs34.2bn in FY27

Domestic cement sales increase 10%, exports decline 20%, while higher prices lift gross margins to 35.1% Combined profitability of cement companies listed on the PSX increased by 17% year-on-year to Rs34.2 billion during the first quarter of FY27, compared with Rs29.1 billion in the corresponding period last year, supported by higher domestic demand and improved cement prices. According to AKD Research's sector review, total cement dispatches increased by 4% to 8.57 million tonnes from 8.27 million tonnes a year earlier. Domestic dispatches rose by 10% to 7.1 million tonnes, increasing their share of total sales to 83% from 78%. However, exports declined by 20% to 1.5 million tonnes, partly due to the closure of the Afghan border. Combined revenue increased by 17% to Rs143.35 billion from Rs122.56 billion, while the cost of sales rose by 13% to Rs93.03 billion from Rs82.27 billion. Gross profit grew by 25% to Rs50.32 billion from Rs40.29 billion, with gross margins improving to 35.1% from 32.9%, an increase of 2.2 percentage points. Operating expenses increased by 10% to Rs8.15 billion, while other income rose by 11% to Rs14.56 billion from Rs13.16 billion. However, finance costs surged by 66% to Rs4.26 billion from Rs2.56 billion, mainly because of higher borrowings associated with acquisitions. Profit before tax increased by 17% to Rs49.28 billion, while taxation rose by the same percentage to Rs15.11 billion. The effective tax rate stood at 30.7%, compared with 30.8% a year earlier. On a quarterly basis, revenue increased by 15%, gross profit by 10% and net profit by 18%, while total dispatches rose by 12% from 7.68 million tonnes in the preceding quarter. Among individual companies, Pioneer Cement (PIOC) recorded the highest year-on-year earnings growth of 73%, with earnings per share (EPS) reaching Rs9.7, supported by higher cement prices, improved margins and a 94% reduction in finance costs. Fauji Cement (FCCL) reported a 51% increase in EPS to Rs2.0, benefiting from improved margins and a 37% decline in finance costs. The company also recorded Rs496 million as its share of profit from Attock Cement, compared with Rs237 million in the preceding quarter, following its acquisition of a 46% stake in Attock Cement. Maple Leaf Cement (MLCF) posted a 36% increase in consolidated EPS to Rs3.5, reflecting the inclusion of Pioneer Cement's earnings. Its finance costs, however, increased sixfold because of acquisition-related borrowing. Kohat Cement (KOHC) reported a 13% increase in EPS to Rs3.6, while its gross margin expanded by 7.9 percentage points to 41.8%, the largest improvement among the companies reviewed. Lucky Cement's (LUCK) unconsolidated EPS increased by 17% to Rs11.7, supported by 21% higher sales and a 19% rise in other income. Its consolidated EPS, however, declined by 2% to Rs14.8 because of lower contributions from joint ventures and associates and weaker performance at Lucky Core Industries. D.G. Khan Cement (DGKC) recorded an 8% increase in EPS to Rs5.3, supported by a 19% increase in total dispatches. Its export volumes rose by 34% to 0.65 million tonnes, while domestic sales increased by 11% to 0.96 million tonnes. Cherat Cement (CHCC) reported a 6% increase in EPS to Rs11.4 despite a 17% decline in total dispatches, benefiting from higher prices and a 51% reduction in finance costs. Gross margins improved to 39.4% for Maple Leaf Cement, 35.9% for Fauji Cement and 34.7% for Pioneer Cement, representing increases of 5.5, 4.4 and 4.9 percentage points, respectively. In contrast, Lucky Cement's gross margin declined by 2.4 percentage points to 36.8% as its cost of sales increased by 26%, while Cherat Cement and D.G. Khan Cement recorded margin reductions of 0.5 and 0.2 percentage points, respectively. The report attributed the increase in combined financing costs mainly to acquisition-related borrowing, including Maple Leaf Cement's purchase of Pioneer Cement and D.G. Khan Cement's acquisition of RMPL. Meanwhile, Pioneer Cement, Cherat Cement, Fauji Cement and Lucky Cement recorded year-on-year reductions in finance costs of 94%, 51%, 37% and 7%, respectively. AKD Research maintained an overweight stance on the cement sector, citing recovering demand, stable gross margins and declining debt levels.