Karachi, February 14, 2023 (PPI-OT): FCCL: 2QFY23 Result Review

Fauji Cement Company Limited (FCCL) announced 2QFY23 result where company posted PAT of PkR2.76bn (EPS: PkR1.1), increase of 19%/65% QoQ/YoY. The result was slightly above our expectations as margins remains elevated on the back of company power dependence on WHR and Solar (~60% of the power requirement).

Net Sales clocked in at PkR18.97bn for 2QFY23, up by 29/38% QoQ/YoY because of the evident improvement in the company offtakes (up by 30%QoQ to 1.39mn tons against 1.07mn tons in 1QFY23). The said increase in the offtakes is mainly attributed by amalgamation of Askari Cement and commissioning of Nizampur capacity (2.05mn TPA), taking the company total capacity to 8.4mn TPA.

Gross margins clocked in at 27% vs. 28.7%/27.4% for 1QFY23/2QFY22. One possible reason for higher than anticipated margins in the last quarter was the unprecedented buildup of closing stock (WIP/FG inventory), possibly due dampened offtakes amid heavy rains/floods during the period.

Finance cost stood at PkR483mn against PkR415mn in the previous quarter, increasing by 17%QoQ. Said increase in finance cost is attributed by the 100bps rise in SBP’s target rate and increased borrowing (possibly) due to future capex plans in D.G. Khan capacity.

Furthermore, other income was reported at PkR137mn against PkR200mn in previous quarter, down by 31%QoQ. This decline in the other income is on the back of lower cash reserves because of recent capacity expansion.

Overall, this takes 1HFY23 PAT to PkR5.1bn vs. PkR3.8bn SPLY, up by 34%. This increase is mainly attributed to ~49% increase in the cement prices.