LAHORE - The Cement sector’s profitability remained flat at over Rs29 billion on the back of decline in net earnings which was down by 51 percent along with depressed gross margins, with some companies witnessing high profitability growths of up to 50 percent.

According to the data, during 9MFY17, cement demand in the country remained upbeat as the cement players were able to dispatch 26.55 million tons domestically, up 11 percent YoY as compared to 23.94 million tons. Experts attribute this to release of funds under PSDP amounting to Rs579.23 billion (72.4pc) out of allocated total budget of Rs800 billion, mega housing projects being carried out in large cities, private sector construction activities, and CPEC related infrastructural projects. However, exports continued to witness downtrend, declining by a massive 15 percent YoY to 3.75 million tons versus 4.4 million tons as a prominent export market, ie Afghanistan witnessed trade disruption due to the ongoing Pak-Afghan border issues. Experts said that rebounded prices of the core input (coal) raised concerns to cement players. They said in November 2016, coal prices had jumped by a massive 98.30 percent, averaged at $97/ton versus low of $49/ton in February 2016 due to multiple factors including the reduction in coal mining days in China to 227 days from 330 days and heavy rainfall in Indonesia. Consequently, 3QFY17 gross margins shrank by 5ppt to 38 percent as compared to 44 percent.

Experts remained optimistic on the sector’s profitability as the encouraging trend witnessed in 9MFY16 is likely to continue, taking cumulative dispatches to 41million tons in FY17, whereas higher coal prices and extension in the super tax will keep net earnings under pressure.