The cement producer’s profits jumped to Rs865 million – with earnings per share (EPS) of Rs0.66 – from Rs499 million (EPS of Rs0.38), exhibiting growth of 73.6%. PHOTO: FILE
Lafarge Pakistan Cement posted an impressive growth of 73% in earnings during the first six months of 2013.
According to a notice sent to the Karachi Stock Exchange the cement producer’s profits jumped to Rs865 million – with earnings per share (EPS) of Rs0.66 – from Rs499 million (EPS of Rs0.38), exhibiting growth of 73.6%. The earnings announcement was not accompanied by a payout to shareholders.
Higher gross profit – due to very high margins – and lower financial costs helped the company post stellar growth in earnings, said Sherman Securities – a brokerage house – in a note to clients on Monday.
The brokerage house continued to say that surging cement prices where retention prices are estimated to be higher than 12% and lower coal prices, which have fallen 17% on average in dollar terms, supported the cement producer to expand gross margins by 390 basis points to 35% in the period.
The year 2013, so far, has seen a continuation of high retention prices that has helped the cement sector improve their margins considerably. In the period that has seen financial health of many cement companies improve on account of better retention prices at home, smaller companies like Lafarge Cement have also benefitted.
In the semi-annual period, the average increase of 12% in Lafarge’s net retention prices is primarily due to rising local industry capacity utilisation amid firm domestic demand.
Finance costs, on the other hand, have been the Achilles heel of Lafarge Cement dampening growth, but in a low-interest rate environment and through restructuring (deleveraging its balance sheet) the cement producer has managed to cut down finance charges significantly.
Financial costs clocked in 57% lower at Rs258 million compared to the corresponding half-year period of 2012 owing to a decline in borrowings and improvement in cash flows, which has supported the company’s bottom-line.
Only in the second quarter of 2013, Lafarge managed to grow its earnings by 64%, which is attributable to higher gross profit led by 11% higher volumetric sales and better margins which were up 6 percentage points to 38% – an impressive expansion in margins by any standard.
Lafarge Pakistan Cement is part of Lafarge – a French company specialising in the manufacture of construction materials. It is the only multinational cement manufacturer in Pakistan, which commenced commercial operations in December 2006 with an annual cement production capacity of 2.5 million tons, says the company’s website.
Lafarge Pakistan’s unique product offering is its product Pakcem, which is the first cement in Pakistan to comply with European Standards (EN 197) and Indian Standards (IS 12269), and also exceeds requirements of Pakistani Standard (PS 232).
Published in The Express Tribune, August 27th 2013.
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