Top two cement companies DG Khan Cement and Lucky Cement announced swelling profits on the back of better higher prices and sales, showing signs that the sector is getting back on track after a torrid run in financial year 2011.
DG Khan Cement profits jumped 14 times to Rs318 million while Lucky Cement net profit more than doubled to Rs1,506 million in the first quarter of 2012, according to notices sent to the Karachi Stock Exchange.
Around 80 per cent of cement plants suffered losses in the previous financial year on the back of stagnant local consumption and non-payment of inland freight subsidy.
DG Khan Cement’s earnings was almost double analyst expectation as they projected it to stand around Rs163 million.
Gross margins of the company improved to 30% during July to September from 19% in the same period last year, said Global Research analyst Wajid Rizvi. Net sales of the company went up by 44% to Rs5.09 billion during the period under review primarily driven by 36% higher net prices.
Meanwhile, Lucky Cement net profit increased 107% to Rs1.51 billion on increased revenue from sales during the period under review.
Net sales rose 34% to Rs7.5 billion on the back of 30% increase in sales and prices.
Conversely, financial charges reported a sharp decline of 44% to Rs81 million because of lower long term debt.
The upward trend of the industry is expected to continue on the back of higher cement prices, increasing local dispatches mainly due to post flood reconstruction in the north and increasing exports to India and Afghanistan, according to analysts.
Published in The Express Tribune, October 26th, 2011.
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