Cement Earnings to Improve 32% in 4QFY25

Staff Report

 Islamabad: With result season around the corner, Sherman Research has presented preliminary earnings preview of our sample cement companies for 4QFY25.

“We expect our cement universe profitability to jump by 32%YoY,” Sherman said.

The earnings remain elevated mainly due to 1) Better export sales (up by 33%YoY) with better prices 2) Lower finance cost due to sharp decline in KIBOR rates and 3) Lower coal and power cost. Furthermore, capacity utilization stood at 54% during 4QFY25 versus 51% during the same period last year.

On QoQ basis, sector earnings is expected to fall 17%QoQ mainly driven by sharp decline in LUCK earnings (down 53%QoQ) due to sharp decline in other income.Airlink Earnings Estimates for FY25

Excluding LUCK, sector earnings is expected to rebound by 22% amid 1) Increase in cement prices and 2) Higher exports (up 55%QoQ), resulting in higher margins.

Local Dispatches remain muted During the quarter, local dispatches stood at 8.8mn tons, remaining flat on yearly basis. Meanwhile, on QoQ basis, local dispatches declined by 9%QoQ amid lower construction activities during the period.

On the other hand, cement export grew sharply by 33%YoY and 55%QoQ as export has become more viable amid lower coal prices and better clinker and cement price, resulting in better margins.

We expect our cement universe topline to clock in at 115bn in 4QFY25,” Sherman said.

During 4QFY25, average cement prices in the country stood at Rs1,402/bag versus Rs1,226/bag (up 14%YoY) during the same period last year. Similarly, cement prices are up 3%QoQ in 4QFY25.

Gross Marginsto remain elevated We expect our cement universe gross margin to arrive at 35% as compared to 30% Quarterly Cement Dispatches (mn tons) 4QFY25 YoY Δ% QoQ % Local 8.8 0% -9% Export 2.7 33% 56% Total 11.5 6% 1%.

FCCL is expected to post net earnings of Rs3.5bn (EPS Rs1.44), up by (2xYoY). The increase in earnings is mainly attributed to 1) Rise in Volumetric sales (up 7%YoY), 2) Lower finance cost and 3) Better gross margins. We anticipate gross margin to remain flat at 36% during 4QFY25. On QoQ basis, earnings are expected to jump by 66%. Moreover we expect DPS of Rs2 in 4QFY25. MLCF is expected to post net earnings of Rs3bn(EPS Rs2.9), up by 93%YoY.

The increase in earnings is mainly due to 1) Higher volumetric sales and 2) Efficient coal and power mix. We anticipate gross margins to arrive at 37% as compared to 38% during the same period last year.

On QoQ basis, earnings are expected to increase by 9%QoQon the back of better cement prices. DGKC is expected to post net earnings of Rs2.2bn(EPS Rs5.16) versus loss of Rs1.7bn during the same period last year.

The rebound in earnings is mainly led by 1) Sharp rise in volumetric sales(up 29%YoY), 2) Better cement pricesin both local and export and 3) Decline in grid rates. We anticipate gross margins to arrive at 27% as compared to 8% during the same period last year.

On QoQ basis, earnings are expected to remain flat as rise in cement price is offset by decline in volumetric sales. Moreover,we expect DPS of Rs4 in 4QFY25. Page 4 CHCC is expected to post net earnings of