Cement Firms Profits Up 89% in 3 QoQ

Staff Report

Islamabad: Pakistan’s listed cement sector reported earnings of Rs33.7bn, up by 89% YoY and down by 3% QoQ. QoQ decrease in earnings is mainly due to lower Net Sales and Gross Margins.

Sales for the cement sector decreased by 15% QoQ and increased by 6% YoY to Rs168.2bn in 3QFY25. Sector revenue decreased on a QoQ basis due to QoQ decrease in total dispatches and lower QoQ retention prices in North.

Domestic dispatches increased by 2% YoY and decreased by 7% QoQ to 9.3mn tons in 3QFY25. Export dispatches were up by 19% YoY and down by 35% QoQ to 1.7mn tons.

While avg. bag prices declined QoQ at Rs1,360 vs. Rs1,447 in 2QFY25 in North and remained almost flat QoQ at Rs1,382 vs Rs1,391 in South.

Gross margins of the sector expanded by 2.9ppts YoY to clock in at 29.7% in 3QFY25 vs 26.8% in 3QFY24 led by lower coal prices and overall, a better fuel and power mix. QoQ gross margins were down vs. 33.0% in 2QFY25 due to lower domestic dispatches and lower retention prices in North.

During 3QFY25, cement players in the southern region mostly relied on Richards Bay coal, while those in the northern region used a combination of Afghan and local coal.

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Richards Bay coal prices fell 7% YoY and by 5% QoQ to Rs37K per ton in 3QFY25. Similarly average Afghan (-14% YoY) and Local (-8% YoY) prices stood at Rs35/33k/ton.

Selling and distribution costs were up by 2% YoY and down by 15% QoQ to Rs7.1bn in 3QFY25. QoQ decline in costs is due to lower total dispatches.

Other income of the sector was up by 150% YoY to Rs15.1bn in 3QFY25, amid higher dividend and interest income. 72% (Rs10.9bn) of income was contributed by Lucky Cement (LUCK).

Cement sector reported EBITDA of Rs48.9bn, up 17% YoY and down by 21% QoQ in 3QFY25. EBITDA margin of the sector stood at 29.1% in 3QFY25 vs 26.4% in 3QFY24 and 31.6% in 2QFY25.

Finance cost of the sector clocked in at Rs6.5bn in 3QFY25, down by 38% YoY mainly due to lower interest rates.

Sector reported effective tax rate of 29.0% in 3QFY25 vs 33.7% in 3QFY24 and 33.2% in 2QFY25.

In 9MFY25, profitability increased by 50% YoY to Rs92.3bn, owing to better gross margins, higher other income and lower finance costs.

Major contributors to the profitability of the cement sector in 3QFY25 were Lucky Cement (LUCK), Bestway Cement (BWCL) and Maple Leaf Cement (MLCF).

LUCK contributed 40% to the total cement sector profitability. LUCK reported profits of Rs13.5bn up 174% YoY due to increase in other income (+283% YoY) and net sales (+10% YoY) in 3QFY25.

LUCK’s other income clocked in at Rs10.9bn, up 283% YoY, driven by dividends received from Lucky Electric (Rs6.0bn), LCI (Rs1.7bn), and Lucky Motors (Rs1.3bn) and higher finance income.

LUCK profitability increased by 86% QoQ due to higher other income (+210% QoQ).

BWCL contributed 18% to cement sector profitability in 3QFY25. Profitability increased 72% YoY due to lower finance costs and higher share of profits from associate. On a QoQ basis profitability decreased by 18% QoQ due to lower net sales and gross margins.

MLCF contributed 8% to the total cement sector profitability in 3QFY25. MLCF earnings in 3QFY25 clocked in at Rs2.8bn, up by 86% YoY due to higher Net Sales and better gross margins.

Company reported gross margins of 35% in 3QFY25 as compared to 30% in 3QFY24 mainly due to lower coal prices, higher retention prices and higher domestic dispatches.

All companies in the sector reported profitability except for Dewan Cement (DCL), which reported a loss of Rs31mn in 3QFY25.

Outlook: We expect profitability to decline on a QoQ basis in 4QFY25 due to lower expected domestic dispatches in light of Eid holidays in April and June. However, profits are expected to improve on a YoY basis mainly due to lower coal costs and higher retention prices.

We maintain our over-weight stance on cement sector where LUCK and FCCL are our top picks,” Topline said.