Can Power Cement keep the profits flowing as renewable energy takes hold?

Key takeaways:

• Rs316mn profit in 3QFY25 vs. Rs717mn loss in 3QFY24
• 9MFY25 profit at Rs349mn vs. Rs1.2bn loss in same period last year
• Gross margins improved to 28%, up from 22% in FY24
• Fuel cost reductions, use of alternative energy, and margin expansion to support outlook
• South region market share at 19%, with stronger exports and retention pricing

Power Cement Ltd (POWER) has posted a sharp turnaround in 3QFY25 earnings, reporting a Rs316 million profit compared to a Rs717 million loss in the same quarter last year. Over the nine-month period, the company swung to a Rs349 million profit, reversing a Rs1.2 billion loss in 9MFY24. The improvement reflects a mix of cost efficiency gains, reduced fuel costs, and margin preservation despite lower sales volumes.

Sales dip, margins surge

Sales revenue in 3QFY25 dropped by 16% YoY, mainly due to an 18.9% decline in dispatches. However, the gross margin improved by 5.6 percentage points, reaching 28%, thanks to strategic cost-saving measures and a favorable fuel mix.

The company benefited from global coal prices falling to around US$100/ton (landed cost at Karachi Port), with a higher share of U.S. coal and cheaper alternative fuels that now make up 10–20% of the fuel mix. These alternative fuels are 25–30% cheaper than imported coal, giving POWER a strong cost advantage.

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Energy strategy: lower costs ahead

Power Cement consumes 28MW of electricity, with 40% sourced internally and the rest purchased from HESCO at Rs35/kWh, translating to an average energy cost of Rs26–28/kWh. This high reliance on expensive grid electricity is set to improve, as the company’s wind power plant is expected to come online in 2H of FY26.

Under a 20-year rental agreement, the wind project will contribute 11% to the total energy mix, operating at 39% efficiency—a move that should substantially reduce power costs in the medium term.

Exports and local market dynamics

International markets have played a key role in profitability this quarter. Export prices have risen, with:

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• Clinker at US$35–37/ton
• Cement at US$44–46/ton

This was driven by robust African demand. On the domestic front, retention prices are up to ~Rs15,000/ton, helped by price hikes in the Southern region where POWER commands a 19% market share.

Capital and future outlook

Management noted 74.35 million preference shares outstanding after recent conversions. Payouts on these are expected to resume once cash flow stabilizes.

Looking ahead, the company expects:

• Margins to remain strong due to continued cost efficiency and renewable investments
• Further increase in alternative fuels (targeting 20%)
• Cement demand to grow 7–10% annually, driven by pent-up Southern demand

Financial highlights

Power Cement has staged a financial recovery in FY25, supported by lower fuel costs, a strategic energy mix shift, and improving export pricing. While sales volumes remain under pressure, rising margins and operational efficiency indicate a positive earnings trajectory going forward. With renewable energy integration and demand recovery in the South, POWER appears to be entering a more stable and potentially profitable phase.

Source: JS Global

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⚠️ This post reflects the author’s personal opinion and is for informational purposes only. It does not constitute financial advice. Investing involves risk and should be done independently. Read full disclaimer →