It was finally time for shareholders of a certain cement company to dip into the company’s profits. In 2QFY24, Pioneer Cement (PSX: PIOC) offered an interim cash dividend of Rs 5 per share, a payout of exactly 67 percent. This comes after a very long time—as long as 21 quarters. Everything—except demand—is working for the company. But who needs demand right?

Eventually, cement companies will. For now, companies are coasting on strong pricing power, cost optimization, timely investments that are making them supplementary income and really cutting down on expenses. This is certainly the case for Pioneer whose topline in 2Q declined 2 percent, but costs of sales declined even further—down 12 percent. This allowed margins to soar. Last year in the second quarter, the company’s margins stood at 27 percent. This year, they stand tall at 35 percent which is impressive.

According to the company’s half yearly report, sales during the period were down 10 percent while revenues grew about 1 percent. Demand is evidently subdued, but due to near stable prices looking up, the topline has persevered. Diversified coal procurement and optimal fuel mix facilitated margins. At the same time, despite inflationary pressures, Pioneer has been cutting down significantly on its overheads. In 2Q, they stand at roughly 1 percent of revenue which is paltry; meanwhile finance costs as a share of revenue are also down now to 6 percent compared to 11 percent in the previous quarter and 8 percent in 2Q last year. Finance costs were a major pain point for the company which the management realized and addressed through early loan resettlements and other means.

In its report, while acknowledging the challenges, the company seems optimistic that the economic landscape would improve post-election leading to “better operating conditions” which is a fairly pedestrian stance on an economy fighting several battles on multiple grounds. But Pioneer has much to celebrate at the moment and even with subdued demand, the company is miles ahead of where it used to be a few years ago. If that is not an E for “Exceeds Expectations”, what would be?


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