MLCF: Back in (profitable) business!

After a gruelling end to last year, Mapleleaf Cement (PSX: MLCF) is getting back in the groove recording a nifty (unconsolidated) profit of Rs5.5 billion during the nine months of the current fiscal year, recovering from a loss of Rs3.7 billion during 9MFY20. The company will be one of many firms this season to turn a comfortable profit on the back of stronger prices fetched in the market and better fixed cost absorption; all signs of covid fatigue be damned.

The industry is certainly on the move. So far, the average monthly offtake for the industry over the past nine months is up 17 percent compared to 9MFY20. In fact, comparing it to years prior, 9MFY21 recorded average monthly growth in sales of 26 percent, 22 percent and 43 percent compared to the period in FY19, FY18 and FY17 respectively. Mapleleaf however seems to have benefited more from better price retention than volumetric sales.

Though 9M numbers are not available, the company saw a decrease in sales of 11 percent in 1HFY21 year on year but recorded a revenue growth of 3 percent. The resultant revenue per ton sold shows an improvement of 16 percent owing to favourable pricing. The trend has continued—in 9M, the company saw its revenue grow by 13 percent. Prices during 3Q are up 51 percent year on year; 18 percent compared to the previous quarter. Overall, cement prices for the 9M period are up 17 percent compared to this period last year. Mapleleaf has benefited from this greatly—its margin improving from negative 1 percent to +21 percent in 9M. Costs are in control owing to less expensive imports.

While administrative and distribution expenses are on level with revenue growth—demonstrating a slight increase to 6 percent of revenue against 5 percent in 9MFY20; the company’s finance costs that had ballooned last year have shrunk down to 4.5 percent of revenues (9MFY20: 10%) owing to lower borrowing costs and depleting debt. These factors and the 36x growth in other income majorly bolstered the bottom-line.