Karachi: Pakistan's cement industry experienced stable profits on a year-over-year basis in the second quarter of fiscal year 2026, with reported earnings reaching Rs35.01 billion. However, the sector saw a 6% decline compared to the previous quarter, attributed to a decrease in other income.
According to JS Global, net sales for the cement sector remained steady year-over-year but increased by 7% quarter-over-quarter to Rs192.1 billion, driven by a 13% rise in domestic dispatches. Conversely, export dispatches faced a significant decline of 23% year-over-year and 21% quarter-over-quarter, reaching 2.04 million tons. This decrease was primarily due to reduced sea-borne exports and halted exports from the northern region amid political instability at the Afghan border.
In terms of pricing, average bag prices in the northern region remained stable on a quarterly basis at Rs1,391 per bag, while the southern region saw similar trends. Year-over-year, northern prices decreased by 2%, whereas southern prices rose by 4%. The sector's gross margins fell to 32.4% in the second quarter of fiscal year 2026, down from 34.2% in the same period the previous year.
The report highlights that the southern region's cement players primarily relied on Richards Bay coal during the quarter, as did those in the northern region due to the unavailability of Afghan coal. Richards Bay coal prices decreased by 23% year-over-year and 2% quarter-over-quarter, reaching US$85 per ton.
The sector's other income saw a significant decline of 14% year-over-year and 35% quarter-over-quarter to approximately Rs8.8 billion. This drop was mainly due to the absence of a Rs6 billion dividend to Lucky Cement from its subsidiary, Lucky Electric Power. Lucky Cement, accounting for 43% of the sector's total other income, stood out as a major contributor, with its profitability increasing by 18% year-over-year due to a decline in finance costs and a doubling of other income.
Overall, the cement sector reported an EBITDA of Rs60 billion, down 3% year-over-year but up 8% quarter-over-quarter. The effective tax rate for the sector increased to 32.2% in the second quarter, compared to 22.8% the previous year. In the first half of fiscal year 2026, profitability rose by 22% year-over-year to Rs72 billion, attributed to lower finance costs and increased other income.
Looking ahead, the sector anticipates an increase in profitability year-over-year due to rising domestic offtakes, lower finance costs, and declining coal prices. However, on a quarterly basis, profitability is expected to remain stable due to reduced construction activity during Ramadan and Eid holidays. Lucky Cement and MLCF remain the top picks within the sector.