Karachi, April 19, 2023 (PPI-OT): FCCL: 3QFY23 Result Review

Fauji Cement Company Limited (FCCL) announced its 3QFY23 result today, where the company posted earnings of PkR1.9bn (EPS: PkR0.8) compared to PAT of PkR2.8bn (EPS: PkR1.1), a decline of 32%QoQ. The decline in earnings is primarily due to lower gross margins and a significant increase of 2.3x in finance cost compared to the previous quarter.

Topline of the company clocked in at PkR18.2bn vs. PkR19.0bn in the previous quarter, a quarterly decline of 3.9%. Decline in the topline is possibly due to a drop in the retention price as offtakes remain flat QoQ.

Gross margins witnessed a decline of ~110bps to settle at 25.9% vs. 27.0% in the previous quarter. Where we believe, i) an increase in weighted average coal price (possibly due to the low percentage of local coal in the new Nizampur line), and ii) rise in the power cost amid increased grid percentage in the power mix during the period negatively impacted the margins.

Other income was reported at PkR284mn against PkR137mn in previous quarter, up by 107%QoQ.

Furthermore, Finance cost increased by 2.3x/5.3x QoQ/YoY to clock in at PkR1.6bn, compared to PkR0.5bn and PkR0.3bn in 2QFY23/3QFY22, respectively. The said increase in the financial charges is attributable to an increase in the borrowing owing to the ongoing capacity expansion at D.G Khan, and increase in the benchmark rate during the quarter.

Overall, 9MFY23 earnings cumulates to PkR7.0bn (EPS: PkR2.8), an increase of 30%YoY compared to NPAT of PkR5.3bn (EPS: PkR2.2) in SPLY. The increase in the nine-month period is majorly attributable to increased retention prices and a slight improvement in gross margins, despite the decline in cement offtakes.