Cement Sector: The top eight companies in the sector (mkt‐cap basis) posted remarkable earnings growth in 1HFY16. The sector posted earnings growth of 24% Y/Y with FCCL, KOHC and MLCF be‐ ing the star performers.
Higher retention prices coupled with low international coal and FO prices contributed significantly to earnings enlargement while lower interest rate envi‐ ronment bodes well for leveraged companies (FCCL and MLCF). Moreover, no major an‐ nouncements related to expansions or investments were disclosed in this season. The key highlights of 1HFY16 results are discussed below.
Robust Domestic Sales; Exports in Terrible Shape: Domestic dispatches during the 1HFY16 touched record high at 15.20mn tons; up by 16% Y/Y that largely neutralizes the brunt of depressed export sales. Higher disbursement of PKR 270bn under PSDP (↑ 86 % Y/Y) along with development on CPEC and sizzling private sector consumption supported the demand.
In contrast, exports are in dire straits as it receded by 26% Y/Y to 3.06mn tons caused by the influx of cheap Iranian cement in Afghanistan and imposition of 13% ‐ 69% anti dumping duty by South African authority. With higher share of local dispatches in overall sales mix (83%), average retention prices surged by 6% Y/Y to PKR 355/bag against PKR 335/bag recorded in 1HFY15.