Gharibwal Cement Limited (PSX: GWLC) was incorporated in Pakistan as public limited company in 1960. The principal activity of the company is the manufacturing and sale of cement.
Pattern of Shareholding
As of June 30,2024, GWLC has a total of 400.274 million shares outstanding which are held by 3299 shareholders.
Directors, CEO, their spouse and minor children have the majority stake of 84.92 percent in the company followed by local general public holding 10.81 percent shares. Around 3.69 percent of GWLC’s shares are held by foreign companies. The remaining shares are held by other categories of shareholders.
Financial Performance (2019-24)
GWLC’s topline posted year-on-year plunge in 2019, 2020 and 2024. Conversely, its bottomline dwindled in all the years under consideration except in 2021 and 2024. The company’s margins drastically fell in 2019 and 2020 followed by a staggering rebound in 2021. In the next two years, GWLC’s margins took a slide.
In 2024, while gross and operating margins largely stayed intact, net margin significantly picked up (see the graph of profitability ratios). The detailed performance review of the period under consideration is given below.
In 2019, GWLC’s topline ticked down by 4.53 percent to clock in at Rs.11,174.33 million. This came on the back of 11.4 percent decrease in the cement dispatches which clocked in at 1.676 million tons in 2019. The decline in sales volume was on the back of lackluster economic activity in the local market and a drastic decline in the company’s exports due to Pakistan-India border tensions.
High cost of raw materials, particularly fuel and electricity charges coupled with Pak Rupee depreciation resulted in 16.16 percent downtick recorded in the company gross profit in 2019.
GP margin also fell from 25 percent in 2018 to 22 percent in 2019 despite an increase recorded in the average selling price. Lower sales volume resulted in 87 percent plunge in distribution expense in 2019.
Administrative expense also plummeted by 1.63 percent in 2019 due to lower vehicle running & travelling charges as well as legal & professional charges. Payroll expense continued to enlarge during the year on the back of inflationary pressure and workforce enhancement from 420 employees in 2018 to 427 employees in 2019.
Other income deteriorated by 61 percent in 2019 as the company booked reversal on provision of doubtful debt and slow-moving stores & spares in the previous year.
Lower profit related provisioning done during the year pushed down other expense by 12.84 percent in 2019. GWLC recorded 11.15 percent drop in its operating profit in 2019 with OP margin clocking in at 17.39 percent versus OP margin of 18.68 percent recorded in the previous year.
Finance cost increased by 39.66 percent in 2019 due to higher discount rate. This was despite the fact that the company settled a significant portion of its outstanding liabilities in 2019. This brought down its gearing ratio from 25 percent in 2018 to 22 percent in 2019.
Net profit tapered off by 51.22 percent to clock in at Rs.736.41 million. This translated into EPS of Rs.1.84 in 2019 versus EPS of Rs.3.77 percent registered in 2018. NP margin also thinned down from 12.90 percent in 2018 to 6.59 percent in 2019.
GWLC recorded 22 percent year-on-year decline in its topline which clocked in at Rs.8714.09 million in 2020. Sales volume dropped by 1 percent to clock in at 1.659 million tons in 2020. This was due to the outbreak of COVID-19 in the last quarter of FY20. GWLC made on export sales in 2020.
During the year, average selling price of cement also fell by 21 percent, which put a dent on the net sales of GWLC. During the year, the government of Punjab increased the rate of royalty on raw materials. This coupled with elevated raw materials, packing materials and fuel charges alongside Pak Rupee depreciation wreaked havoc on the gross profit of the company which sank by 96.49 percent in 2020.
GP margin fell to its lowest ebb of 1 percent in 2020. 31 percent decline in distribution expense in 2020 signifies lower sales volume. Administrative expense also slid by 11.82 percent in 2020 primarily due to lower sales volume as the company streamlined its workforce to 382 employees.
Other income deteriorated by 28.68 percent in 2020 due to lower rental income received from Baluchistan Glass Limited (a related party). No provisioning done for WWF and WPPF pushed down other expense by 51.13 percent in 2020. GWLC recorded operating loss of Rs.319.43 million in 2020. Finance cost narrowed down by 57 percent in 2020 due to lesser borrowings and the onset of monetary easing in the COVID quarter. Gearing ratio fell to 16 percent in 2020.
The realization of deferred tax assets during the year transformed loss-before-tax of Rs.561.69 million into net profit of Rs.131.32 million in 2020, down 82.17 percent year-on-year. This culminated into EPS of Rs.0.33 and NP margin of 1.51 percent.
After two successive years of posting decline in net sales, 2021 brought merry times for GWLC. During the year, its topline posted a phenomenal year-on-year growth of 38.94 percent to clock in at Rs.12,106.99 million. This came on the back of 7.1 percent uptick in the company’s dispatches which clocked in at 1.78 million tons. Increase in selling prices also played a pivotal role in driving up the net sales. This coupled with reduction in energy prices during the year pushed up gross profit by anunparalleled rate of 3599 percent. GP margin also attained its optimum level of 26.36 percent in 2021.
Distribution expense mounted by 176.76 percent in 2021 on account of higher salaries of sales force. Administrative expense escalated by 18.68 percent in 2021 due to inflationary pressure and hiring of additional employees which took its workforce to 395 employees. GWLC didn’t record any other income in 2021 as no rental income was received from its related party Baluchistan Glass Limited. Conversely, other expense magnified by 213.44 percent in 2021 due to hefty provisioning done for WWF and WPPF. Operating profit clocked in at an unprecedented level of Rs.2,565.34 million in 2021 with OP margin clocking in at 21.19 percent.
Despite monetary easing and lesser borrowings, net finance cost multiplied by 14.44 percent in 2021. This was due to lower finance income recognized during the year as GWLC booked reversal of late payment surcharge on GIDC in the previous year. Gearing ratio fell to 8 percent in 2021. Net profit strengthened by 1081.40 percent to clock in at Rs.1551.38 million in 2021. EPS was recorded at Rs.3.88 and NP margin at 12.81 percent in 2021.
In 2022, GWLC’s net sales mounted by 33.76 percent to clock in at Rs.16,193.79 million. This was due to higher prices of cement while there was 5.2 percent dip in the company’s dispatches which clocked in at 1.683 million tons in 2022.
Deteriorating macroeconomic indicators resulted in a slowdown in construction and infrastructure related activities in the country, resulting in low demand of cement. Pak Rupee depreciation as well as higher fuel and power cost drove the cost of sales up by 39.15 percent in 2022. Gross profit grew by 18.69 percent in 2022; however, GP margin fell to 23.39 percent. Distribution expense posted 33.40 percent increase in 2022 on the back of market induced rise in the salaries of sales forces.
Administrative expense mounted by 62.72 percent in 2022 on account of higher payroll expense. This was due to inflationary pressure while the company squeezed its workforce to 393 employees in 2022. During the year, the company sold a property (a piece of land) on gain, resulting in other income of Rs.60.93 million. Other expense escalated by 24.40 percent in 2022 due to higher profit related provisioning done during the year.
Operating profit picked up by 13.56 percent in 2022, however, OP margin fell to 18 percent. Net finance cost slipped by 42.54 percent in 2022 due to considerable decline in outstanding borrowings. This brought down gearing ratio to 2 percent in 2022. The imposition of 10 percent super tax during the year resulted in 12.68 percent diminution recorded in GWLC’s net profit which clocked in at Rs.1354.72 million in 2022. EPS ticked down to Rs.3.38 while NP margin also fell to 8.37 percent in 2022.
GWLC’s topline climbed up by 13.10 percent to clock in at Rs.18,315.89 million in 2023. Cement prices continued to soar, buttressing the company’s net sales. This was despite 19.80 percent downtick in GWLC’s dispatches which clocked in at 1.350 million tons in 2023.
Higher fuel & electricity charges, elevated rate of royalty on raw materials, Pak Rupee depreciation and higher indigenous inflation allowed the company to record a paltry 0.15 percent uptick in its gross profit in 2023. GP margin also fell to 20.71 percent in 2023.
While the company continued to rationalize its workforce, which clocked in at 381 employees in 2023, inflation induced spike in salaries pushed up administrative expense by 11.15 percent in 2023. Distribution expense also grew by 12.12 percent in 2023 due to higher salaries of sales force. High-base effect due to the sale of land in 2022 resulted in 98.95 percent decline in other income in 2023.
Other expense also slid by 3 percent in 2023 due to lower profit related provisioning. Operating profit narrowed down by 4.45 percent in 2023 with OP margin clocking in at 15.20 percent. Net finance cost plummeted by 55.11 percent in 2023 as the company recognized higher markup income on its bank deposits and on loan advanced to Baluchistan Glass Limited.
Conversely, its finance cost shrank due to settlement of substantial portion of its liabilities during the year. Gearing ratio was recorded at 0 percent in 2023 as the company’s cash & bank balances were higher than its total debt.
Net profit weakened by 9 percent to clock in at Rs.1232.41 million in 2023. This translated into EPS of Rs.3.08 and NP margin of 6.73 percent in 2023.
In 2024, the company’s dispatches fell by 11.6 percent to clock in at 1.19 million tons. While average selling price of cement continued to keep its chin up, GWLC couldn’t sustain topline which dipped by 0.82 percent to clock in at Rs.18,165.08 million.
Elevated cement price during the year was able to absorb 12.1 percent increase in the cost of sales per ton and yielded a GP margin of 20.78 percent in 2024. Gross profit posted 0.50 percent dip in 2024. Lower sales volume pushed distribution expense down by 3.43 percent in 2024. Conversely, administrative expense ticked up by 2.91 percent in 2024 due to inflationary pressure.
Number of employees stood intact at 381 in 2024. Gain worth Rs.7.68 million recognized on the disposal of fixed assets resulted in 1101.41 percent growth in other income in 2024. Other expense ticked up by 2.15 percent in 2024 due to higher profit related provisioning done during the year.
Operating profit dipped by 1.21 percent in 2024 with OP margin clocking in at 15.14 percent, almost at the last year’s level. GWLC recorded net finance income of Rs. 80.75 million in 2024 due to hefty dividend income and mark-up income on loan granted to Baluchistan Glass Limited which offset its finance cost.
Gearing ratio clocked in at 3 percent in 2024 as the company obtained huge long-term loan to finance its capital expenditure. GWLC installed 12 MW solar power plant in 2024 with an approval of additional 8 MW to be installed in 2025.
Net profit increased by 41.41 percent to clock in at Rs.1742.73 million in 2024. This culminated in EPS of Rs.4.35 and NP margin of 9.59 percent in 2024.
Recent Performance (9MFY25)
During the nine-month period of FY25, GWLC posted 9.75 percent upturn in its net sales, which clocked in at Rs.14,770.12 million. During the period under consideration, the company’s sales volume posted a reasonable growth of 2.9 percent to clock in at 917,209 tons. Increased volume coupled with higher retention prices were the driving forces behind the topline growth recorded in 9MFY25.
Topline growth couldn’t translate into higher margins as cost of sales mounted by 11.80 percent in 9MFY25 on the back of higher royalty on raw materials imposed by the Government of Punjab. Gross profit ticked up by 1.55 percent in 9MFY25 while GP margin fell to 18.51 percent from GP margin of 20 percent recorded during the same period last year.
Inflationary pressure and an uptick in sales and production volumes resulted in 6.28 percent increase in distribution expense and 3.27 percent spike in administrative expense in 9MFY25. Higher profit related provisioning seems to have driven other expense up by 2.33 percent in 9MFY25. Other income also grew by 17.40 percent during the period.
GWLC’s operating profit posted a paltry 0.98 percent growth in 9MFY25 with its OP margin clocking in at 13.60 percent versus OP margin of 14.77 percent recorded in 9MFY24.
Net finance income strengthened by 57.36 percent in 9MFY25 due to higher dividend and mark-up income. During the period under consideration, the company’s short-term investments and loan granted to related parties significantly increased,which bolstered its finance income.
Net profit inched up by 1.11 percent to clock in at Rs.1257.60 million in 9MFY25. This translated into EPS of Rs.3.14 in 9MFY25 versus EPS of Rs.3.11 recorded in 9MFY24. NP margin dipped from 9.24 percent in 9MFY24 to 8.51 percent in 9MFY25.
Future Outlook
Going forward, cement prices are expected to ride an upward trajectory. This coupled with the government policies to boost construction and real estate sectors will boost the demand, resulting in robust performance of cement sector.
GWLC is aggressively working on cost effective alternative energy solution to cut down its energy cost. This coupled with cooler replacement project and BMR of its production lines will boost operational efficiency and reduce the cost.
GWCL should also focus on export sales to utilize its idle capacity, cover its fixed cost, hedge against its import and improve its margins and profitability.
Copyright Business Recorder, 2025
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