Powering Pioneer

Despite being a small player in the cement industry, Pioneer is not lacking in ambition. It currently contributes to about 4 percent of the total cement industrys capacity (1.93 million tons) but is already in the process of building a new plant, a 12 MW waste heat recovery unit and a 24 MW coal fired power plant. The company has a lot on its plates.

Its half yearly accounts paint a positive picture. Higher dispatches brought on by greater demand has contributed to a 19 percent growth in the topline in 1HFY17, year on year (FY16: 11%, FY15: 5%) but higher costs translated to a nominal growth in gross margins. Margins went up from 40 percent to 41 percent in 1HFY17.

But the focus on energy efficiency in the new plant will go a long way. The new expansion will be a Greenfield project in Khushab that will boost Pioneers share in the industry to at least 6 percent by the time the expansion comes through.

Finance costs were higher in 1HFY17 and will continue to grow as the new projects kick off. More or less, the company has managed to keep its indirect costs at their minimum but the company may have to market its product and invest in more outreach which could incur an additional cost.

A 52 percent growth to its top-line, clocking at Rs1.5 billion in 1HFY17 is impressive compared to peers such as Gharibwal and Cherat and speaks to a tighter fist on expenses but also lower taxes. Consequently the increase in profit margins to 29 percent, from 23 percent is much higher than the increase in gross margins. But given Pioneers plans, the latter is expected to improve in the long run, and thats what we like to hear.