July-December 2011: cement sector posts Rs 5.2 billion profit

Cement sector's financial performance during first half of current fiscal year has been quite impressive, as the sector profitability turned around and posted Rs 5.2 billion net profit against a loss of Rs 1.6 billion during same period of last fiscal year.
Analysts said that massive increase in prices during last one year is basic reason of increase in profit of the cement sector. "Net sales of the sector posted a healthy growth of 33 percent YoY to Rs 70 billion during July-December of fiscal year 2011-2012 as compared to Rs 53 billion in corresponding period of last fiscal year," revealed InvestCap in a research report on cement sector.
According to the analysis, which conducted with a sample of 16 companies (out of total 19) representing 96 percent of the sector's market capitalisation, gross margins of the sector also improved by a solid 946bps YoY to 26.4 percent as the sector enjoyed 38 percent YoY increase in product prices in the first half and net retention price improved by an average 28 percent YoY.
In terms of region-wise cement sales during July-December, local dispatches in the northern region, having 84 percent share in total capacity, contributed 79 percent to industry dispatches. These included 8.9 million tons of local, up 6.0 percent YoY and 3.3 million tons of exports, up 3.0 percent YoY, the report said.
On the other hand, with an increase of 19 percent, YoY local dispatches in the southern region stood at 1.9 million tons and export dispatches down by 20 percent to 1.2 million during the period under review. As far as individual companies are concerned, remarkably and after a long time sector giant Lucky Cement's share in the sector profits shrank to 58 percent in July-December of fiscal year 2012 against 88 percent last fiscal year, as other smaller loss-making manufacturers also came into profits, as this time around 10 companies were in profits against only 4 last year.
DG Khan Cement posted enormous growth in first half and its earnings with a jump of 566 percent YoY increased to Rs 1.28 billion. Bestway Cement, third in row with 14 percent contribution to sector profits, also saw a turnaround in the net profit compared to losses in same period of last year, followed by Kohat Cement and Attock Cement with 11 percent and 10 percent share in sector's profits against minus 4 percent and 8 percent last year respectively, it added.