MLCF: Slow ascent

In just three years, Mapleleaf Cement (PSX: MLCF) has watched its revenues double, though most of this growth came in FY22 and FY23. This fiscal year, revenues grew only 7 percent, in fact, saved only by improved retention prices, and not volumes. In 9M, dispatches dropped 5 percent, though exports grew 30 percent.

The company has always had a strong presence in exporting markets across borders and it seems growing exports have continued unabated even when local markets dried up with demand. Despite lower overall dispatches, the fiscal year did not pan out as bad, not only due to price hikes that facilitated the topline but also reduced costs. The company spent energy focusing on coal supplies domestically and was able to optimize its coal costs by managing its inventory well. The company has also been taking cost-cutting initiatives by using alternative fuels and power sources (coal-fired power plant run by its subsidiary Mapleleaf Power, solar, and waste heat recovery) and switching to more affordable packing materials all to trim the fat. This helped FY24 to improve on margins, landing at 32 percent from last year’s 29 percent.

However, overheads and finance costs had the company beat. In FY24, overheads as a share of revenue grew to 11 percent from 8 percent while finance costs—ballooned by peak interest rates and credit against MLCF’s new production line—grew to 6 percent from 4 percent. Together the expenditure grew to 17 percent of revenue which is substantial in and of itself, but also in comparison to last year’s 12 percent. As a result, before-tax profits declined 3 percent. The lower incidence of income tax compared to last year brought the ultimate earnings up by 17 percent year on year. The company ended the year on a good note considering the challenges that demand brought to nearly all cement companies in the same boat. What set Mapleleaf apart may be its growing control over its costs, especially its reduced reliance on the grid which remains susceptible to steep tariff hikes as the myriad of issues faced by the power sector come to a head. Mapleleaf may not be a mover and shaker in the cement business and has a long way to climb up to the top, but it is not laying low either, eager to make investments into the business.