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Despite reduced dispatches and higher costs of production owing to expensive coal and pricier fuel, Cherat Cement (PSX: CHCC) managed to improve its revenues, grow itsmargins as well as the bottom line during FY22 which is no small feat.

The company’s revenue rose 27 percent during the fiscal year after dispatches dropped 10 percent where local were down 5 percent and exports fell by 42 percent. Cement exports have certainly come under immense heat due to economic and political distresses faced by key importers such as Afghanistan after the US exit and Taliban takeover, or Bangladesh and Sri Lanka that are facing substantial economic woes of their own, the latter facing the worse financial crises in its history defaulting on its debt obligations. Meanwhile, Afghan traders don’t have dollars or operational banking channels to pay for imports.

But even at lowered demand, Cherat’s top-line grew on the back of substantially improved retention during the year having raised prices frequently in the market. On the costs side, the company has been procuring nearly 90 percent of its coal from Afghanistan which is less costly and more accessible due to the proximity to the border and resultantly, reduced transport costs.

Cherat grew its margins from 27 percent last year to 28 percent, an improvement despite higher fuel and energy costs. The company’s dependence on grid for electricity due to diversification and energy efficiency. Meanwhile, earnings grew 39 percent with before-tax earnings growing by 57 percent. The company faced a higher tax incidence this year (tax in Q4 was nearly 52%). Despite that, the growth in earnings came due to reduce finance costs and controlled overheads and a growth in gross profits.

With PSDP cuts, high inflation, and suppressed purchasing power, domestic demand in construction would remain under pressure, though flood related reconstruction and rehabilitation may or could boost offtake in the coming year. Exports are unlikely to recover for the industry as most traditional markets have dried up either because of internal economic turmoil and ensuing reduction in demand or high freight costs making exports unviable.

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