Profit after taxation (PAT) of cement manufacturers listed on Pakistan Stock Exchange has declined enormously in 1QFY18, ranging from 85 percent to 17 percent, as compared to same period last year. Profitability of the cement industry was continuously declining for the last few quarters and the situation keeps on worsening amid increase in input cost and heavy duties and taxes on cement consumption.
According to data submitted in the stock exchange, DG Khan Cement suffered the most with its PAT going down to Rs 417.82 million in 1QFY18, as compared to Rs. 2.83 billion during the first quarter of FY 2018, an enormous decline of 85 percent.
Among bigger players, Bestway Cement managed to earn PAT of 2.26 billion rupees in 1QFY18; however it was 25 percent less than almost Rs 3 billion they earned in 1QFY17. Lucky Cement's PAT dropped from Rs 3.01 billion in 1QFY17 to Rs. 2.48 billion in same period this year, depicting a 17 percent decrease.
An expert in the cement industry said that despite the increase in input cost, the manufacturers have absorbed most of it to not hurt the construction activities; however, it has badly affected their profitability in just three months of this financial year.
Despite that the industry is contributing significantly to the government revenues and contributed more than Rs 115 billion in duties and taxes during FY2017-18 which translates to almost Rs 160 per 50 kg bag of cement. During FY2018-19, cement industry is paying duties and taxes of almost Rs 180 per bag so far.
Cement exports have been continuously increasing this year; however, decrease in local demand is putting pressure on the industry. "If the government supports the industry by decreasing duties and taxes, the local demand may increase with decrease in cement prices, boosting the construction sector and earning opportunities for workers associated with the sector," the source in the cement industry added.
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