Steady gains continue for Fauji Cement

Although cement sales have been on the uptrend in this fiscal, the domestic market appears to have cooled in the outgoing quarter. The quarterly results made public by Fauji Cement (KSE: FCCL) allude to the same market dynamic whereby quarter-on-quarter dispatches by the firm dropped, even though year-to-sales have registered an increase.
The company’s top line dropped by about eight percent in the third quarter when compared to 2QFY15. However, 9MFY15 sales stand near Rs13.42 billion, posting a rise of seven percent over 9MFY14.
In line with the industry trend, lower input prices have helped FCCL in the period under review. Resultantly the company’s gross margins stood improved at 37 percent in 3QFY15, as compared to 35 percent in 3QFY14. Here again, the quarter-on-quarter analysis reveals the opposite effect. Tahir Abbas at Arif Habib Limited highlighted that “higher than expected repair and maintenance cost during the period” was the primary culprit here.
Both distribution cost and administrative expenses for the company have continued to rise as a proportion of the top line, although their quantum is relatively low. In 3QFY15, distribution costs rose 19 percent when compared to 3QFY14. Administrative expenses rose by a whopping 30 percent over the same period.
The benefits of deleveraging have continued to accrue for the company, despite a jump of 35 percent in finance costs in 3QFY15 when compared to 3QFY14. The nine month tally for this head stood at Rs583 million, which is lower than 9MFY14 by 27 percent. In the end, it’s the bottom line that matters most. FCCL managed a solid improvement in its net margins that have come from 16 percent in 9MFY14 to 20 percent in 9MFY15. This is synonymous with no less than 32 percent growth in the company’s earnings per share for the fiscal, so far.

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Fauji Cement

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Rs (mn)                    3QFY15   YoY chg   9MFY15   YoY chg

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Sales                        4427        3%    13418        7%

Cost of goods sold           2801        0%     8624        4%

Gross profit                 1626        8%     4794       12%

Gross margin                  37%                36%

Distribution cost              33       19%      109       33%

Administrative expenses        66       30%      196       28%

Other operating expenses       96        5%      278       20%

Finance cost                  181       35%      583      -27%

PAT                           982       32%     2650       33%

Net margin                    22%                20%

EPS (Rs)                     0.71       31%     1.92       32%

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