KARACHI: Pakistan’s cement sector reported a 10% year-over-year increase in profit after tax to Rs21.5 billion in the first quarter of fiscal year 2027, supported by 19% revenue growth and a 2-percentage-point expansion in gross margins, according to a Sherman Securities research report.
The sector’s revenue rose to Rs198.3 billion from Rs166.8 billion in the same period last year, while gross profit climbed 26% to Rs66.5 billion. The gains came despite higher operating and finance costs, with finance costs rising 38% year-over-year to Rs5.8 billion.
Local dispatches grew 9% year-over-year to 10.8 million tons, while retention prices increased 14% in the north region and 8% in the south. Exports, however, declined 11% to 2.3 million tons, driven entirely by southern players, as northern players continued to face constraints from the Afghan border closure. Exports fell to 19% of total volume sold, down from 23% a year earlier.
Despite the earnings growth, the sector underperformed the benchmark KSE-100 index, delivering a negative return of 10.9% compared with the index’s negative 5.7%, a 5.2% underperformance. The report attributed the gap to negative market sentiment stemming from regional geopolitical tensions rather than underlying fundamentals.
Company-wise, POWER led with 36% year-over-year revenue growth, supported by a 41% increase in volumes on higher exports. PIOC and BWCL followed at 29% and 25%, respectively, as northern-zone players benefited most from sharper price increases in the region. MLCF and LUCK posted growth of 22% and 21%. KOHC saw total volumes decline 3% but still recorded double-digit revenue growth on higher prices.
FCCL grew 11%, while CHCC posted only 2% growth. For CHCC, zero exports compared with 157,000 tons in the prior-year period offset price gains, leaving total volumes down 17% despite a 7% rise in local dispatches.
Industry gross margins improved to 34% from 32%, as manufacturers offset higher input costs through price hikes and the consumption of existing coal inventories. International coal prices rose 26% year-over-year to $114 per ton, while diesel prices surged 39% to Rs386 per liter. Northern-based players faced significant cost pressures from disruptions in Afghan coal supplies.
The report warned of margin compression in coming quarters as coal inventories, typically covering two to three months of requirements, are depleted and manufacturers are forced to buy coal at higher prices. Rising sea and inland freight costs, driven by higher fuel prices and war-risk premiums, are expected to intensify the pressure. With limited room for further price increases amid demand sensitivity, manufacturers are unlikely to fully pass on the additional costs, the report said.
On earnings per share, PIOC led the sector with 73% growth to Rs9.73, driven by revenue growth, margin expansion and a 94% decline in finance costs. FCCL followed with 51% growth to Rs2.02.
DGKC and CHCC posted modest EPS growth of 8% and 6% to Rs5.30 and Rs11.44, respectively, as gross margins remained largely flat due to their fuel mix. MLCF’s unconsolidated earnings declined 18% to Rs2.04 per share, primarily due to a 7.5-fold surge in finance costs following its acquisition of Pioneer Cement, which reduced cash reserves and increased leverage.
The report cited risks including changes in coal and oil prices, lower-than-expected dispatch growth, changes in cement prices and higher-than-expected interest rates.
