Cherat Cement announces record annual profit of Rs1.22 billion

Abnormally high gross margins allow small-cap cement producer to propel earnings.

KARACHI:

Keeping up pace with peers, Cherat Cement Company on Tuesday reported a record profit of Rs1.22 billion, up 181% from Rs436 million for the fiscal year 2012-13.

According to a notice sent by the company to the Karachi Stock Exchange, the record earnings announcement was accompanied by a payout of Rs1.5 per share, which is in addition to the interim dividend of Re1 per share the cement company has already paid to shareholders.

The earnings per share (EPS) of the company jumped significantly to Rs12.81 from Rs4.57 during the year.

Cherat Cement results are in line with its peers that also grew significantly in the last fiscal year.

“Like other cement manufacturers, Cherat Cement significantly gained in fiscal 2012 because of favourable cement prices and low international coal prices throughout the year,” said JS Global Capital analyst Atif Zafar.



Volumes of cement companies have grown significantly in the last fiscal year as demand spiked despite 20% increase in the price of a 50-kilogramme cement bag.

Cherat is a small-cap cement company with a capacity of 1.1 million tons, but the company’s management believes that it has a big advantage of being close to the Afghanistan border, giving it an edge over other player in exports to Afghanistan and also India.

The turnover of the company rose to Rs6.2 billion from Rs5.45 billion, showing an increase of 15%, while gross profit increased to Rs2.18 billion from Rs1.15 billion, a significant jump of 89.5%. The cement producer managed to increase its gross margins by 1,400 basis points from 21% last year to 35% in fiscal 2013.

The company, in its notice to the KSE, acknowledged that stability in cement prices were behind the 15% increase in revenues and exponentially higher gross profit margins in the year.

Currently, the company is operating its plant close to its maximum capacity. With the end of a stellar year, the company is looking to expand its current production capacity for which it will hold negotiations with various cement plants suppliers, the notice said.

The results announcement also said the cement industry will continue to grow in the current fiscal year because of government plans to increase infrastructure developments in the country.



However, it also showed concerns on the decline in exports to Afghanistan and India owing to security and political uncertainties in the region. Moreover, the availability of Iranian cement in Afghanistan is also giving tough competition to the Pakistani cement makers, it added. 

Published in The Express Tribune, August 21^st, 2013.

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