Q1 cement sector profits likely to rise 16pc to Rs32.4bn YoY

KARACHI: Profitability of the topline cement universe is expected to increase 16 percent year-on-year (YoY) to Rs32.4 billion in 1QFY27 from Rs27.8 billion in 1QFY26, according to Topline Research.

The research house expects sector profitability to increase 16 percent quarter-on-quarter (QoQ) as well. The YoY increase is primarily attributed to higher net sales amid increased retention prices, while the QoQ increase is expected to be driven by higher other income, mainly due to dividend income from Lucky Electric Power Company Limited (LEPCL) to Lucky Cement (LUCK).

Net sales of the cement universe are expected to reach Rs143 billion in 1QFY27, up 25 percent YoY and 14 percent QoQ. The YoY increase is primarily attributed to higher cement prices and growth in local cement dispatches.

Local cement dispatches increased 8 percent YoY in 1QFY27, while export dispatches declined 11 percent YoY. On a QoQ basis, domestic cement dispatches increased 9 percent, while export dispatches rose 10 percent.

Cement prices increased by Rs100-150 per bag YoY during 1QFY27, mainly due to higher fuel costs amid elevated international coal and diesel prices.

Topline Research expects finance costs of the cement universe to increase 51 percent YoY to Rs3.4 billion in 1QFY27. Maple Leaf Cement Limited (MLCF) accounts for nearly 57 percent of the sector’s finance costs following debt raised for the acquisition of Pioneer Cement Limited (PIOC).

Richards Bay coal prices averaged around US$113.93 per ton in 1QFY27, compared with US$113.2 per ton in 4QFY26 and US$90.3 per ton in 1QFY26.

Gross margins of the cement universe are expected to stand at 35 percent in 1QFY27, compared with 36 percent in 4QFY26 and 33 percent in 1QFY26. According to Topline Research, the YoY improvement is primarily due to higher retention prices outpacing the increase in coal costs, supported by greater use of renewables in the power mix.

Other income of the sector is estimated at Rs14.2 billion in 1QFY27, up 9 percent YoY and 27 percent QoQ, primarily driven by the dividend to LUCK.

Topline Research does not expect dividend payouts from companies within its cement universe during 1QFY27.

Lucky Cement (LUCK) is expected to report consolidated earnings of Rs16.7 per share in 1QFY27, up 11 percent YoY but down 3 percent QoQ. The YoY increase is attributed to improved local cement operations and higher other income.

On an unconsolidated basis, LUCK is expected to report earnings per share of Rs10.3, up 3 percent YoY and 52 percent QoQ. The QoQ increase is expected to be supported by higher cement sales and other income, including an expected dividend from LEPCL in line with its historical payout trend.

LUCK’s gross margin is expected at 37 percent in 1QFY27, compared with 39 percent in 1QFY26 and 38 percent in 4QFY26.

Kohat Cement Company Limited (KOHC) is expected to report earnings per share of Rs3.1 in 1QFY27, down 4 percent YoY and 14 percent QoQ. Its gross margin is expected to improve to 36 percent from 34 percent in 1QFY26, supported by better retention prices. The YoY earnings decline is attributed to other income, while the QoQ decline is due to margin normalisation.

Fauji Cement Company Limited (FCCL) is expected to report earnings per share of Rs2.1, up 56 percent YoY but down 5 percent QoQ. The YoY increase is expected to be driven by higher retention prices, improved gross margins and share of associate contribution. Gross margin is projected at 37 percent, compared with 32 percent in 1QFY26 and 38 percent in 4QFY26.

DG Khan Cement Company Limited (DGKC) is expected to report unconsolidated earnings per share of Rs7.5 in 1QFY27, up 52 percent YoY and 7 percent QoQ. The increase is expected to be supported by higher retention prices, improved domestic dispatches and lower finance costs. Gross margin is projected at 27 percent, compared with 22 percent in 1QFY26 and 24 percent in 4QFY26.

Cherat Cement Company Limited (CHCC) is expected to report earnings per share of Rs10.50, up 18 percent QoQ but down 2 percent YoY. The YoY decline is expected to reflect lower export volumes and higher coal costs, while the QoQ increase is mainly driven by recovery in margins following line-stoppage costs in 4QFY26. Gross margin is projected at 35 percent, compared with 36 percent in 1QFY26 and 27 percent in 4QFY26.

Maple Leaf Cement Limited (MLCF) is expected to report consolidated earnings per share of Rs3.8 in 1QFY27, up 47 percent YoY but down 11 percent QoQ from Rs4.3 in 4QFY26. The YoY increase is primarily attributed to the consolidation of PIOC, partly offset by higher finance costs on acquisition debt.

The QoQ decline is expected to reflect lower gross margins amid higher fuel costs. MLCF’s gross margin is projected at 35 percent in 1QFY27, compared with 34 percent in 1QFY26 and 44 percent in 4QFY26. The higher gross margin in 4QFY26 was attributed to a one-off impact from a change in the treatment of royalty expense.

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