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Much like its peers located in the north zone, FY19 has not been the best of years for Pioneer Cement (PSX: PIOC). The company was not able to shield its bottom-line from the dual impact of rising costs and falling demand scenario. As a result, the company’s profitability was slashed by half in FY19 preceded by a 4 percent decline in revenues during the year. If anything must change for improvement in FY20, it will have to be demanded.

Domestic demand has tapered off during the fiscal year as public as well as private spending slowed down. Some regulatory measures such as ban on non-filers to purchase property or the Supreme Court ban on high rise construction slowed down construction demand in the private sector. Though considering austerity measures and cuts to development spending, the ongoing projects allowed the company to not fall too far below the revenue threshold of last year. It seems the reason is good average retention prices. The company in its 9MFY19 saw total dispatch decline of 14 percent (domestic: down 15%). At that rate, the revenue decline of just 4 percent is reasonable for the full-year.

On the exports side too, demand remained lethargic as Afghanistan and India both became ever more impenetrable for Pakistani cement makers—the latter for political tensions entirely. Companies have been selling off clinker at much cheaper rates to markets overseas. Pioneer’s exports grew by 18 percent in 9M, though clinker sells for much cheaper.

On the costs side, though coal prices have averaged lower, the rupee depreciated did have a negative impact on overall costs of production. The company managed to maintain all its other expenses as a share of revenue at 6 percent despite higher exports which can typically lead to higher distribution costs.

Rising borrowing costs did grow finance costs as a share of revenue from 1 percent to 3 percent which ultimately hit the bottom-line hard, exacerbated by a much higher tax incidence this year.

In upcoming months, it will become clear where domestic demand will sit. If the Naya Pakistan Housing Program which has already been launched will see some work on ground, it would create demand for cement players. On the cost side, companies must fully utilize the falling coal prices in the global market which can be done through effective inventory management.

Meanwhile, if monetary policy is loosened, finance costs may improve as well.