The current fiscal may have been a stellar year for most cement manufacturers but for Cherat Cement it is more of a prelude for anticipated successes. The companys sales had registered marginal increase in the first six months of the fiscal. But in the third quarter, that tally plopped due to a planned plant shut down in 3QFY15. Consequently, the cumulative topline growth for 9MFY15 has been only one percent when compared to the previous fiscal.
The cost of production has continued to outpace sales growth since the beginning of the fiscal and the recently concluded quarter was no exception. Distribution and administrative costs also kept inching higher as a proportion of the top line. The result announcement did contain some soothing news for investors. The company informed that Rs1 billion will be spent on installing another Waste Heat Recovery System for the second production line and that the necessary equipment will be purchased from China now that the board has given necessary approvals.
The company may find solace in the fact that despite the higher expenditures, its net margins have deteriorated only slightly with the 9MFY15 ratio standing at 20 percent, compared to 22 percent in 9MFY14. But as the quarters roll by, it is increasingly evident that FY15 will not be the best year the company has had, by a long shot.
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Cherat Cement
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Rs (mn) 3QFY15 YoY chg 9MFY15 YoY chg
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Sales 1416 -7% 4726 1%
Cost of goods sold 1013 1% 3358 10%
Gross profit 403 1368 -17%
Gross margin 28% -18%
Distribution cost 51 6% 151 9%
Administrative expenses 39 8% 122 17%
Other operating expenses 26 -19% 66 -37%
Finance cost 9 -19% 30 49%
PAT 298 -8% 938 -9%
Net margin 21% 20%
EPS (Rs) 1.92 6
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Source: KSE notice