Karachi, March 1 , 2021: Pakistan cement sector posted profit of Rs11.3 billion during 2QFY21, up 114 percent QoQ due to increase in GP margins by 600bps QoQ, increase in sales by 18 percent QoQ, and decline in finance cost by 12 percent QoQ. Total profit during 1HFY21 clocked in at Rs17 billion compared to loss of Rs6.3 billion in 1HFY20.
Cement sector posted highest ever quarterly net sales of RsRs91 billion, driven by highest ever volumetric sales of 15 million tons (+11 percent QoQ) and increase in cement prices (MRP) by ~5 percent.
Local retention prices have increased by an average of 6 percent QoQ or Rs20/bag due to increase in cement prices by average of ~Rs25/bag in 2QFY21.
Our sample includes 15 out of the 16 listed cement companies, i.e. ~100 percent of the sector’s market capitalization. Gross Margins of the sector touched eight quarter high of 25.2 percent due to higher retention prices.
Coal prices (FOB) during 2QFY21 averaged at US$59/ton (incorporating a 1.5 month lag) compared to US$64/ ton in 2QFY20 and US$55/ton in 1QFY21. The PKR/US$ averaged at Rs161 during 2QFY21 compared to Rs156 and Rs161 in 2QFY20 and 1QFY21, respectively.
Finance cost of the sector declined by 12 percent QoQ to Rs3.1 billion due to decline in interest bearing liabilities.Effective tax rate during the quarter clocked in at 22 percent or Rs3.1 billion in 2QFY21 compared to reversal of Rs611 million in 2QFY20.
Selling and Distribution expenses declined 3 percent QoQ despite rising fuel prices as exports declined by 15 percent QoQ to 2.3 million tons.Other expenses increased by 88 percent QoQ. This mainly includes WWF/WPPF, which is indexed to profitability of the companies.
We remain Over-Weight on Pakistan Cement sector, wherein our top picks are D.G Khan (DGKC) and Maple Leaf Cement (MLCF).
