Earnings Report /
Pakistan

Fauji Cement: 3QFY22 review – Lower volumes offset earnings; broadly in line

  • FCCL has posted NPAT of PKR1.2bn for 3QFY22 (EPS: PKR0.89), up 22% yoy, but down 16% qoq in 3QFY22.

  • Revenue has increased 30%yoy, but down 8%qoq to PKR7.7bn. The qoq decline in revenues follows a 17% decrease in volumes.

  • GMs have declined to 25.4%, down 4.4ppt yoy and 3.0ppt qoq, but still higher than our expectation of 24.3%.

Rahul Hans
Rahul Hans

Head of Research

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Intermarket Securities
26 April 2022

Fauji Cement Company Ltd (FCCL) has posted NPAT of PKR1.2bn for 3QFY22 (EPS: PKR0.89), up 22% yoy, but down 16% qoq in 3QFY22. The result has come broadly in-line with our expected EPS of PKR0.82. This takes 9MFY22 net profit to PKR4.1bn (EPS: PKR2.94), up 56% yoy.

Key highlights for 3QFY22 result:

  • Net Sales have increased 30% yoy, but down 8% qoq to PKR7.7bn. The sequential decline in revenues follows a 17% qoq decrease in volumes. This is despite an increase in local prices during the quarter.

  • Gross margins have declined to 25.4%, down 4.4ppt yoy and 3.0ppt qoq, but still higher than our expectation of 24.3%. The qoq decline in margins is due to (i) lower utilization, (ii) increase in variable cost amid elevated international and Afghan coal prices, and (iii) an inadequate increase in cement prices given the cost increases.

  • Finance cost turned positive during the quarter; this is due to PKR163mn finance income, which took total finance cost to a positive PKR144mn.

  • Among other line items: (i) FCCL has booked effective tax rate of 32% in 3QFY22 vs 35% same period last year, and (ii) admin expenses have increased to PKR146mn, up 25% yoy; this can be due to an increase in salaries and other expenses. We await detailed financials for more clarity on the latter.

FCCL’s gross margins have come off sharply in 3QFY22. This is due to lower utilization levels and increase in Afghan and international coal prices. Local prices have not increased in tandem to pass on the full impact. However, in 4QFY22, higher demand coupled with recent increase in cement prices should sequentially revive FCCL’s bottom-line, in our view. Our Buy stance on the scrip is based on a TP of PKR21/sh.