Karachi: Pakistan's cement industry is expected to experience a 9% year-over-year decline in profitability for the second quarter of the fiscal year 2026, with profits projected at Rs19.3 billion compared to Rs21.2 billion in the same quarter of the previous year. The decrease is primarily attributed to lower domestic retention prices.
According to JS Global, the sector's profitability is also anticipated to drop by 25% on a quarter-over-quarter basis, largely due to the absence of dividend income from Lucky Electric Company (LEPCL). Excluding this factor, earnings would remain relatively stable compared to the previous quarter. Despite a rise in domestic dispatches and a modest recovery in retention prices, increased fuel costs, driven by the unavailability of Afghan coal, have impacted the industry's financial performance.
Net sales for the sector are expected to rise by 4% quarter-over-quarter, reaching Rs107.8 billion, mainly due to a 12% increase in domestic dispatches. Capacity utilization of the cement sector improved to 63% in the second quarter of FY26, up from 61% in the same period last year and 59% in the first quarter of the current fiscal year.
Regional dynamics also contributed to the challenges faced by the industry. Cement manufacturers in the South region relied on Richards Bay coal, while those in the North region shifted towards it due to disruptions in Afghan coal supply. The average retention price for the industry was estimated at Rs792 per bag, reflecting a 6% decline year-over-year.
The report from JS Global also highlighted varied performances among leading cement companies. Lucky Cement is anticipated to see a 9% year-over-year increase in earnings, buoyed by its diversified business operations. Meanwhile, Kohat Cement and Maple Leaf Cement are expected to report earnings declines of 17% year-over-year, affected by lower retention prices and elevated fuel costs. DG Khan Cement's earnings are projected to remain flat on a year-over-year basis.
In summary, the Pakistan cement industry faces a challenging financial outlook for the second quarter of FY26, with lower retention prices and rising fuel costs posing significant hurdles to profitability.