Maple Leaf Cement records highest profit in half a decade

Bottom-line improves six-and-a-half-fold to Rs3.23b for the fiscal year 2012-13.

KARACHI:

Maple Leaf Cement, the cement producer with the most debt in the sector, has recorded an abnormal growth in profits, which was driven by higher cement prices, lower coal prices, dipping interest rates and tax reversal.

According to a notice sent to the Karachi Stock Exchange, the building-material maker’s profits multiplied six and a half times or 550% in terms of growth in percentages to Rs3.23 billion for the fiscal year 2012-13 against Rs496 million in fiscal 2012. The company did not announce any cash dividend probably due to high leverage, believes Taurus Securities analyst Hassaan Ghafoor.

Rising cement prices in the country are helping substantial growth across the whole sector and absorbing the effect of sluggish demand. Average cement prices of a 50-kilogramme bag recorded for the year clocked in at Rs450, according to Investcap analyst Abdul Azeem.

Sales grew 12.3% to Rs17.36 billion for the year owing to lucrative cement prices on the local front and better export volumes. But more importantly, the company managed to boost its gross profits by Rs2 billion to Rs6.05 billion for the year as lower international coal prices resulted in cost-savings for the company. Resultantly, gross margins clocked in 880 basis points higher – one percentage point is equal to 100 basis points – at 34.8% for the year, signalling to an exceptional year for the highly-leverage building-material maker.

State Bank of Pakistan’s policy of slashing interest rates has also helped the cement sector immensely as whole, but mostly Maple Leaf Cement, as financial costs have declined making room for better growth in earnings. Financial charges for the company decreased 27.5% to Rs1.7 billion for the year supporting the company’s bottom-line to post the highest profit in five years.

Tax-reversal of Rs125 million in the fourth quarter of the year provided further augmentation against a tax charge of Rs63 million in the first nine months of fiscal 2013.

Published in The Express Tribune, September 26^th, 2013.

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