Fauji Cement reports highest profit in decades

Profits jump ten-fold to billions from millions a year earlier.

KARACHI:

In the first nine months of fiscal 2013, Fauji Cement reported the highest profits in over a decade – 2002 is the earliest year for which the data is available on the company’s website – beating all preceding full-year profit figures in just nine months.

According to a notice sent to the Karachi Stock Exchange, cumulative nine-month profits for the company clocked in 10 times higher at Rs1.57 billion, compared to an unimpressive Rs140 million in the corresponding period of last year.

Fiscal year 2012-13 has been favourable for the cement sector, as higher retention prices – which some analysts attribute to cartelisation in the sector – falling coal prices and fuel costs have pushed margins up for the sector exponentially.

Fauji Cement’s expansion plans have propelled the company’s volumetric growth, as the new production line enabled it to achieve 26% growth in selling volumes to 1.85 million tons. Consequently, revenues clocked in 56% higher at Rs11.639 billion.

After up-gradation of the cement producer’s plant in 2011, and employment of refuse derived fuel (RDF) to power factories, utilisation for Fauji Cement has been continuously growing and touched 72% in the period under review, compared to 66% in the corresponding period of last year.

Revenue per ton rose by 24% to Rs6,311, as against Rs5,082 during the same period of the previous year, while cost per bag inched up 8%. This resulted in gross margins expansion by 10 percentage points to 32%, according to a Topline Securities research note.

Moreover, growth in margins can also be attributed to softer international coal prices ($85 per ton) coupled with aggressive use of RDF as kilning fuel, which is a cheaper alternative to coal.

Declining finance costs due to a 250 basis points reduction in interest rates, and 16% reduction in outstanding long-term debt also supported growth in profitability.

Published in The Express Tribune, May 1^st, 2013.

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