Attock Cement (ACPL) surprised the market with a higher than expected dividend payout, even as the companys top line growth skirted just below analysts predictions.
The companys half yearly accounts exhibit sales growth of 7.6 percent when compared to the same period, last year.
However, ACPLs gross margin showed a stellar improvement in the same period. "In FY14, they upgraded their cement grinding mill that reduced power consumption and thus improved their gross margins", commented Taha Bin Yamin research analyst at Shajar Capital.
During the period, all domestic cement manufacturers saw cement prices beef up in the earlier months.
At the same time, falling coal prices have been a boon to all including Attock Cement.
ACPLs share in cement exports has climbed from eight percent in 1HFY14, to 10 percent in 1HFY15.
The higher proportion of sales overseas has racked up higher distribution cost. "The impact of lower fuel prices will start factoring in the current and upcoming quarter, so the company should be able to rein in distribution costs as a percentage of sales"
commented Sajjad Hussain, research analyst at BMA Capital.
Unlike other large manufacturers (Lucky Cement, DG Khan Cement), higher gas prices are not a significant factor for ACPL as the company has no captive power plants until its 40MW facility comes online in FY18.
That project was expected to juice the companys ability to payout dividends which
is why the Rs4.5 per share payout has come as a pleasant surprise.
Going forward, any spur in economic activity, specifically private sector investments will hold the key for ACPL and other major industry players. While the PSDP budget is largely unutilized (only about 30 percent allocated in half year), governments constrained fiscal position will likely limit its spending under this head in coming months also.
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Attock Cement
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Rs (mn) 1HFY14 1HFY15 chg
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Sales 5917 6369 7.6%
Cost of goods sold 4276 4372 2.2%
Gross profit 1641 1997 21.7%
Gross margin 28% 31%
Distribution cost 385 544 41.2%
Administrative expenses 151 174 15.3%
Other operating expenses 83 102 22.9%
Finance cost 12 15 28.5%
PAT 871 1025 17.7%
Net margin 15% 16%
EPS (Rs) 7.61 8.95 17.6%
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Source: KSE notice