Cement offtake in the period 7MFY23 has dropped 18 percent cumulatively from last year, which is not a subtle drop in demand in any way. The slowdown is apparent. But despite this, the industry is poised to deliver a positively glowing financial report card.

Because despite a drop in volumes, the industry has kept prices significantly elevated which it will benefit from as the year rolls in. In 1QFY23, despite a drop in sales of 25 percent, the industry (BR Research calculations used financial accounts of 16 listed companies) had a net revenue growth of 23 percent year on year, a before tax earnings growth of 11 percent and post-tax profits that were up 5 percent during the quarter. This was made possible by favorable prices in nearly all the domestic markets, the impact of which was much more substantial than cost inflation. Whereas the revenue per ton sold rose 64 percent during the quarter, the comparative cost per ton sold rose slightly less—63 percent. This helped margins remain steady and facilitated the bottom-line.

In the second quarter, the industry recorded better dispatches compared to the first quarter and prices remained steady; sticking upward which will help the industry record a strong growth in the top-line. Other costs and expenses may be higher due to inflation, particularly related to fuel and transport. Meanwhile, higher interest rates should also impact the finance cost component of cement players. However, the bottom-line for the first half will prove promising, despite the economy being in a massive doldrum.

Most industries at the moment are facing challenges in opening LCs which is forcing them to keep their plants closed as they are in dire shortage of important inputs that can only or are mostly imported. Though coal is imported for the cement industry, domestic players have been opting to procure local and Afghan coal to meet their fuelling needs which also now comes in handy when imports are difficult. Despite a visible slowdown in demand which is expected to persist, at least the industry is not in danger of pulling down shutters, specially at a time when most cement manufacturers are undergoing expansion in capacity.