{"id":9114,"date":"2025-05-20T10:39:43","date_gmt":"2025-05-20T05:39:43","guid":{"rendered":"https:\/\/ksestocks.com\/blog\/?p=9114"},"modified":"2025-05-20T10:39:48","modified_gmt":"2025-05-20T05:39:48","slug":"coal-costs-drop-dividends-rise-whats-driving-cement-sector-profitability","status":"publish","type":"post","link":"https:\/\/ksestocks.com\/blog\/coal-costs-drop-dividends-rise-whats-driving-cement-sector-profitability\/","title":{"rendered":"Coal Costs Drop, Dividends Rise: What\u2019s Driving Cement Sector Profitability?"},"content":{"rendered":"\n<p>Pakistan\u2019s listed cement sector posted stellar earnings of Rs33.7 billion in 3QFY25, marking an impressive <strong>89% year-on-year growth<\/strong>, though profits dipped <strong>3% quarter-on-quarter<\/strong> as sales and gross margins softened slightly. While the sector continues to show strength compared to last year, short-term challenges, particularly declining domestic demand and softer pricing in the North, have led to a marginal sequential decline in performance.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Sales and dispatches: growth with a cautionary tone<\/h2>\n\n\n\n<p>Sector sales clocked in at Rs168.2 billion, up <strong>6% YoY<\/strong> but down <strong>15% QoQ<\/strong>, reflecting a slowdown in total dispatches and reduced retention prices, especially in the northern region.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Domestic dispatches<\/strong> increased <strong>2% YoY<\/strong> to 9.3 million tons, but slipped <strong>7% QoQ<\/strong>.<\/li>\n\n\n\n<li><strong>Export dispatches<\/strong> posted a <strong>19% YoY rise<\/strong>, yet fell <strong>35% QoQ<\/strong> to 1.7 million tons.<\/li>\n<\/ul>\n\n\n\n<p>Average cement bag prices in the <strong>North<\/strong> dropped from <strong>Rs1,447 to Rs1,360<\/strong>, while prices in the <strong>South<\/strong> remained relatively stable at <strong>Rs1,382<\/strong>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Margins and input costs: fuel mix drives efficiency<\/h2>\n\n\n\n<p>The sector\u2019s <strong>gross margins expanded by 2.9 percentage points YoY<\/strong>, reaching <strong>29.7%<\/strong> due to improved cost management and a more efficient fuel mix. However, margins slipped from <strong>33.0% in 2QFY25<\/strong>, mainly due to weaker domestic demand and lower pricing in the North.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Southern players<\/strong> leaned on imported Richards Bay coal, which declined <strong>7% YoY and 5% QoQ<\/strong> to around Rs37,000\/ton.<\/li>\n\n\n\n<li><strong>Northern players<\/strong> utilized a blend of Afghan and local coal, which also saw price drops of <strong>14%<\/strong> and <strong>8%<\/strong> YoY, respectively.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Earnings drivers: other income and cost control<\/h2>\n\n\n\n<p>While topline growth was modest, profitability got a significant boost from other income, which surged <strong>150% YoY<\/strong> to Rs15.1 billion, with <strong>Lucky Cement (<a href=\"https:\/\/ksestocks.com\/blog\/tag\/luck\/\" target=\"_blank\" rel=\"noopener\" title=\"LUCK\">LUCK<\/a>)<\/strong> alone contributing Rs10.9 billion. Dividends from <strong>Lucky Electric, LCI, and Lucky Motors<\/strong> played a major role in LUCK&#8217;s robust earnings.<\/p>\n\n\n\n<p><strong>Finance costs<\/strong> fell <strong>38% YoY<\/strong>, thanks to lower interest rates, easing the burden on bottom lines across the sector. The effective <strong>tax rate<\/strong> stood at <strong>29.0%<\/strong>, lower than the previous year\u2019s 33.7%.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Top performers and laggards<\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>LUCK<\/strong> remained the undisputed leader, contributing <strong>40%<\/strong> to total sector profitability. It reported earnings of Rs 13.5 billion, up <strong>174% YoY<\/strong> and <strong>86% QoQ<\/strong>.<\/li>\n\n\n\n<li><strong>Bestway Cement (<a href=\"https:\/\/ksestocks.com\/blog\/tag\/bwcl\/\" target=\"_blank\" rel=\"noopener\" title=\"BWCL\">BWCL<\/a>)<\/strong> followed with Rs6.1 billion in profit, up <strong>72% YoY<\/strong>, although down <strong>18% QoQ<\/strong> due to softer gross margins and net sales.<\/li>\n\n\n\n<li><strong>Maple Leaf Cement (<a href=\"https:\/\/ksestocks.com\/blog\/tag\/mlcf\/\" target=\"_blank\" rel=\"noopener\" title=\"MLCF\">MLCF<\/a>)<\/strong> posted earnings of Rs2.8 billion, an <strong>86% YoY increase<\/strong>, fueled by better margins and increased sales.<\/li>\n<\/ul>\n\n\n\n<p>On the other hand, <strong>Dewan Cement (<a href=\"https:\/\/ksestocks.com\/blog\/tag\/dcl\/\" target=\"_blank\" rel=\"noopener\" title=\"DCL\">DCL<\/a>)<\/strong> was the only listed company to report a <strong>loss of Rs31 million<\/strong> in the quarter.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">EBITDA and profitability overview<\/h2>\n\n\n\n<p>The sector reported <strong>EBITDA of Rs48.9 billion<\/strong>, up <strong>17% YoY<\/strong>, but down <strong>21% QoQ<\/strong>, with margins settling at <strong>29.1%<\/strong>, down from <strong>31.6% in 2QFY25<\/strong>.<\/p>\n\n\n\n<p>For the nine-month period (9MFY25), <strong>profitability rose by 50% YoY <\/strong>to Rs92.3 billion, driven by improved cost efficiencies, higher other income, and lower finance costs.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Outlook: short-term weakness, long-term strength<\/h2>\n\n\n\n<p>The sector may face <strong>QoQ earnings pressure in 4QFY25<\/strong>, owing to <strong>lower expected domestic dispatches<\/strong> due to <strong>Eid holidays in April and June<\/strong>. However, on a <strong>YoY basis<\/strong>, profitability is expected to improve, driven by <strong>lower coal prices and higher retention prices<\/strong>.<\/p>\n\n\n\n<p>Analysts maintain an <strong>overweight stance<\/strong> on the sector with <strong>LUCK and <\/strong><a href=\"https:\/\/ksestocks.com\/blog\/tag\/fccl\/\" target=\"_blank\" rel=\"noopener\" title=\"FCCL\"><strong>FCCL<\/strong> <\/a>highlighted as <strong>top picks<\/strong>, given their operational strength and diversified income streams.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">\ud83d\udccc <strong>Summary highlights<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Earnings up <strong>89% YoY<\/strong>, down <strong>3% QoQ<\/strong>.<\/li>\n\n\n\n<li>Gross margin at <strong>29.7%<\/strong>, boosted by lower fuel costs.<\/li>\n\n\n\n<li>LUCK dominates, contributing <strong>40%<\/strong> of sector profits.<\/li>\n\n\n\n<li>Sector EBITDA: <strong>Rs48.9bn<\/strong>, margin: <strong>29.1%<\/strong>.<\/li>\n\n\n\n<li>QoQ pressures are expected in 4QFY25, but long-term fundamentals remain strong. <\/li>\n<\/ul>\n\n\n\n<p><strong>Source: Topline Securities (Private) Limited<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Pakistan\u2019s listed cement sector posted stellar earnings of Rs33.7 billion in 3QFY25, marking an impressive 89% year-on-year growth, though profits dipped 3% quarter-on-quarter as sales and gross margins softened slightly. While the sector continues to show strength compared to last year, short-term challenges\u2014particularly declining domestic demand and softer pricing in the North\u2014have led to a marginal sequential decline in performance.<\/p>\n","protected":false},"author":9252,"featured_media":4781,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[154,343],"tags":[318,384,41,10,93],"class_list":["post-9114","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-analysis","category-sector-analysis","tag-bwcl","tag-dcl","tag-fccl","tag-luck","tag-mlcf"],"featured_image_src":{"landsacpe":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/05\/CEMENT-SECTOR-ECONOMY-1140x445.jpg",1140,445,true],"list":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/05\/CEMENT-SECTOR-ECONOMY-463x348.jpg",463,348,true],"medium":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/05\/CEMENT-SECTOR-ECONOMY-300x188.jpg",300,188,true],"full":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/05\/CEMENT-SECTOR-ECONOMY.jpg",1920,1200,false]},"_links":{"self":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/posts\/9114","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/users\/9252"}],"replies":[{"embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/comments?post=9114"}],"version-history":[{"count":1,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/posts\/9114\/revisions"}],"predecessor-version":[{"id":9292,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/posts\/9114\/revisions\/9292"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/media\/4781"}],"wp:attachment":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/media?parent=9114"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/categories?post=9114"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/tags?post=9114"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}