![sales growth and improved margins due to declining costs are likely to augment the industry s profits by 5 6 photo file sales growth and improved margins due to declining costs are likely to augment the industry s profits by 5 6 photo file](https://i1.tribune.com.pk/wp-content/uploads/2013/07/579275-profitBusiness-1374261743.jpg)
Cement is probably the only sector that has enjoyed the support of domestic as well as global trends for the past many months that is leading to a continuous increase in its profits.
Analysts believe that the sector is going to outperform all others in the upcoming result season.
In a report, Topline Securities said cement manufacturers would likely post a 10-12% growth in the fourth quarter (April-June) of FY13, just behind 16% gains posted by the benchmark KSE 100-share index in the same quarter.
Though domestic sales remained stagnant in the quarter growing by a mere 1% to 6.7 million tons against 6.6 million tons in the previous quarter, exports rose 13% to 2.2 million tons, which pushed total sales up 4% to 8.9 million tons compared to 8.6 million tons in the previous quarter.
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Sales growth and improved margins due to declining costs are likely to augment the industry’s profits by 5-6%. Apart from this, increase in other income in the form of dividends from investments for Lucky Cement and DG Khan Cement will boost overall profits by another 5-6%.
This coupled with one-time dividend payout – majority of cement companies pay full and final dividend at the end of the fiscal year – is expected to attract investor attention to the sector.
Stock prices of two leading cement companies tell the growth story of the entire sector in the last quarter.
Share price of Lucky Cement, the leading cement manufacturer in Pakistan, stood at Rs230.90 at the close of trading at the KSE on Friday, up 37% from Rs168.7 on April 1 this year.
Stock price of DG Khan Cement closed at Rs93.73 on Friday, up 32% from Rs71.13 at the start of the fourth quarter in April.
In the fourth quarter, the KSE 100-share index rose 16% (15% in dollar terms) compared to return of 7% (5% in dollar terms) posted in the previous quarter.
The market performance was buoyed by a smooth transition of power and foreign buying. Market participants are now eagerly waiting to find out how different sectors performed in the quarter.
Summit Capital analyst Sarfaraz Abbasi agrees that the cement industry is going to post over 10% growth in the last quarter of FY13.
All domestic and global factors that have an impact on the cement industry were positive, so the cement sector would continue to grow in the near future unless any major changes came in those factors, he said.
Low international coal prices, high allocation for the public sector development programme in the last budget and better cement prices were all contributing to the growth.
With all these positive factors, cement companies were paying back their loans and improving their bottom-line, he added.
Published in The Express Tribune, July 20th, 2013.
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