Karachi, October 09, 2023 (PPI-OT): FCCL and ACPL 1QFY24 result previews

We present 1QFY24 earnings expectations for Attock Cement Ltd. (ACPL) and Fauji Cement Ltd. (FCCL). We expect ACPL to post an EPS of Rs13.7, up 16x YoY over Rs10/share (after tax) gain on sale of stake of its subsidiary, Saqr-Alkeetan. FCCL, on the other hand is expected to post 1QFY24 EPS of Rs0.5, down 48% YoY over lower YoY gross margins and higher finance costs.

We maintain a positive outlook on the Cement sector, considering its robust long-term fundamentals. As restrictions on coal imports ease, cement manufacturers now have the opportunity to avail lower international prices for the commodity. Any commodity price surge owing to recent global geopolitical conflicts, however, remains a key risk.

Higher finance cost and tax charge to impact bottomline

We present 1QFY24 earnings expectations for Attock Cement Ltd and Fauji Cement Ltd. Better retention prices are expected to support top-line of cement manufacturers. On the cost front, cement players have opted to significantly increase the quantum of relatively cheaper variants in their coal mix providing cushion to margins. Higher finance costs and the elevated tax charge compared to previous year, however, are expected to dent profitability, barring any one-offs.

ACPL: Gain from sale of stake in subsidiary to lift EPS

The Board of Attock Cement (ACPL) is scheduled to meet on 9th October, 2023 to discuss 1QFY24 results. ACPL is expected to post 1QFY24 earnings of Rs1.9bn translating into an EPS of Rs13.7. For the quarter, we anticipate top-line to reach Rs 7.43bn, reflecting a 5% increase compared to the previous quarter. This growth is primarily attributed to better retention prices. Consequently, we expect gross margins to jump 10ppt on a YoY basis, over improved retention prices and efficient coal management.

The key highlight of quarter’s result is expected to be the significant rise in other income of ~Rs2.2bn, (Rs10/share after tax) attributable to one-time gain on the sale of ACPL's subsidiary, 'Saqr Al-Keetan.' We also expect a dividend announcement of Rs4.0/share alongside the results.

FCCL: Earnings expected to take a dip amid cost pressures

The Board of Fauji Cement (FCCL) is scheduled to meet on 20th October, 2023 to discuss 1QFY24 results. For 1QFY24, top-line is expected to clock in at Rs19.8bn showing a 35% YoY increase, due to better retention prices and higher dispatches.

Despite better retention prices for the quarter, gross margins are expected to drop to 24.1% (-4.3ppt YoY) due to higher costs. While the company has made adjustments in cost reporting by shifting some of its expenses from Cost of goods sold to the Selling and Distribution head, we have not incorporated that change in these estimates to keep gross level performance comparable with prior periods. Higher finance cost and elevated tax charge further impact earnings estimate taking it to Rs0.5/share for the quarter, a decline of 48% YoY. We do not expect any dividend alongside the quarter results.