POWER 9MFY24 analyst briefing highlights

Power Cement Limited, a subsidiary of the National Bank of Pakistan and part of the Arif Habib Group is the second largest cement producer in Pakistan’s South Zone. Here’s a summary of the key takeaways from their 9MFY24 analyst briefing.

Production and Dispatches

Production capacity

Power Cement has a total production capacity of 3.37 million tons, making it a significant player in the industry. The company was recognized as the fastest-growing brand of grey cement in 2023.

Dispatches

During the first nine months of FY24:

• Total dispatches increased by 13% year-over-year to 2.05 million tons.
• Clinker exports surged by 2.73 times compared to the previous year.
• Local dispatches decreased by 14% due to higher transportation costs from the Axle Load Regime.

Capacity utilization

The overall capacity utilization improved to 76%, up from 68% in the same period last year.

Production changes

• Clinker production rose by 12%, reaching 1.82 million tons.
• Cement production fell by 15% to 1.29 million tons from 1.52 million tons in the same period last year.

Financial Performance

Sales and profits

• Net sales increased by 16% to PKR 24.93 billion from PKR 21.51 billion in the same period last year.
• Gross profit grew by 13% year-over-year due to a 54% drop in international coal prices and stable PKR/USD exchange rates.

Expenses and profit margins

• Selling and distribution expenses rose by 1.01 times year-over-year, influenced by higher export levels and the Axle Load Regime.
• Operating profit decreased by 1% due to these increased expenses.
• The company reported a net loss after tax of PKR 1.18 billion, primarily due to a 39% year-over-year increase in finance costs caused by high interest rates.

Market Expansion and Pricing

Export growth

Power Cement expanded its export markets to seven new countries, including the USA, UK, and five African nations. The management expects higher margins from developed countries compared to the African region, where margins are lower.

Export pricing

The average price per ton for both clinker and cement exports is USD 31-32.

Sustainability and Future Plans

Alternative fuels and energy savings

The company aims to reduce its coal dependency by using biomass fuel, which already cut coal needs by 10% during 9MFY24. Additionally, Power Cement produced:

• 5,115 MW of solar energy
• 52,824 MW of WHRS energy
  These efforts reduced carbon emissions by 2,788 tons and 28,789 tons, respectively.

Wind power project

Power Cement signed a 9.6 MW wind power project with Burj Solar (Pvt.) Ltd, aiming to reduce fossil fuel usage and save up to PKR 685 million per year.

Alternative Fuel Program

The company plans to implement an “Alternative Fuel Program” to cut CO2 emissions by 31,577 tons through WHRS and solar energy. This program is expected to be completed within 12-18 months.

Energy mix

Currently, the company’s energy mix consists of 66% from the National Grid and 34% from alternative sources.

Cost savings from policy rate cut

With the policy rate cut to 20.50%, the management anticipates saving around PKR 830 million in finance costs in the next financial year, assuming rates remain unchanged.

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Disclaimer:

The information in this article is based on research by Taurus Research. All efforts have been made to ensure the data represented in this article is as per the research report. This report should not be considered investment advice. Readers are encouraged to consult a qualified financial advisor before making any investment decisions.