Pioneer Cement (PSX: PIOC) announced its financial performance for FY17 yesterday along with a final cash dividend of Rs3.35 per share, which took the total payout to Rs5.5 per share.

In has been seen that the gross margins of the cement sector have become slightly weary of late, while revenues have trotted up all around with greater domestic demand especially in the North region. Pioneer Cement too has seen its revenue climb by 13.5 percent year-on-year in FY17. However, costs of sales have increased more than the sales growth due to lower retention prices and higher coal prices. Its gross margins came down by one percent in FY17 versus FY16.

On the other hand, finance costs have also inched upwards. PICO saw its finance cost almost double in FY17, which hindered the net margins from increasing. However, after the installation of its Waste Heat Recovery (WHR) Plant in December 2016, the firm saw a drop in its effective tax rate significantly due to the tax benefit from it.

While the increase in FY17 profits for Pioneer Cement did not come through as expected, the cement company has been primed for growth amid greater demand cycle in the sector. Pioneer has planned to expand its existing 2.03 million tons of capacity with additional 2.1 million tons, which will take its market share from 4 percent of the cement industry to 6 percent in the next five years when the projects come through complete. This will also pull up the finance cost, which could keep a lid on the net margins.

In FY17, PIOC executed contracts with Sinoma-Chengdu Design & Research Institute of Building Materials Industry Co., Ltd China for the supply of machinery, equipment and technical services for a brownfield new cement plant at Chenki/Kushab district of Punjab, with a production capacity of around 8,000 tons’ clinker per day along with a 12 MW Waste Heat Recovery Power Plant and a 24 MW Coal Fired Power Plant. It has recently awarded Loesche with the contract for four vertical roller mills for its new production line.