Karachi: Power Cement Ltd (POWER) has reported a significant turnaround in its financial performance, with the company posting a profit after tax of Rs316 million in the third quarter of fiscal year 2025. This comes in stark contrast to the Rs717 million loss recorded during the same period last year. For the first nine months of FY25, the company achieved earnings of Rs349 million, compared to a loss of Rs1,187 million in the corresponding period last year.
Despite a 16% year-over-year decline in sales revenue in 3QFY25, driven by an 18.9% drop in dispatches, the company managed to improve its gross margins by 5.6 percentage points. This was attributed to cost-efficiency measures and a reduction in coal prices.
The management highlighted the impact of significantly lower fuel costs in recent quarters, as global coal prices have decreased. The current landed cost at Karachi Port is approximately US$100 per ton, primarily using US coal. Additionally, the company has increased its use of alternative fuels, which now constitute 10-20% of the fuel mix and are 25-30% cheaper than coal.
Power Cement's average power requirement is 28MW, with 40% sourced internally and the remaining from HESCO at Rs35 per kWh. This results in an overall average cost of Rs26-28 per kWh.
Looking ahead, the company expects its wind power plant to commence operations in the second half of FY26. Under a 20-year rental agreement, this plant is anticipated to contribute 11% to the company's power mix, with an estimated efficiency of 39%.
In terms of market dynamics, export prices have risen, with clinker prices increasing to US$35-37 per ton and cement prices to US$44-46 per ton, driven by demand from African markets. Domestically, retention prices are approximately Rs15,000 per ton following recent price adjustments in the South, where the company holds a 19% market share.
The management indicated that they have 74.35 million outstanding preference shares and plan to resume payouts once the cash flow situation improves. They foresee the current margin growth continuing, bolstered by reduced cost pressures, investments in renewable energy, and ongoing cost efficiency measures.
Furthermore, cement demand is projected to grow by 7% to 10% in the coming years, fueled by pent-up demand in the South region.