How does a healthy revenue growth translate to an equally ‘healthy’ drop in earnings. Unfortunately for Pioneer (PSX: PIOC), FY22 is the year to find out. The main culprit seems to be the super tax that took the year-long effective tax to 73 percent. Before tax earnings in fact stood at 79 percent higher than last year but due to the higher tax liability overall took after tax earnings down 47 percent.

The company’s top-line grew 46 percent on the back of substantially improved cement prices, though offtake remained subdued at about 4 percent growth. Drop in exports to Afghanistan has affected cement players located in the north and supplying to markets across the border which doubly hurt volumes as domestic demand remained dull.

The company improved its margins to 23 percent during the year (FY21: 19%) because of the growth in the top-line all the while being shielded from the massive increase in costs of international coal and other fuels by switching to more affordable Afghan coal and use of captive power.

Meanwhile, overheads included other charges as a share of revenue stood firm and low at 2 percent. Only two years ago, this used to be 6 percent. However, finance costs (as % of revenue) stood at 8 percent which is same as last year but still high owing to higher short-term borrowings and rise in interest rates. This takes expenses to 10 percent of revenue putting significant pressure on the bottom-line. The tax incident hurt even more as other income dropped due to an impairment loss on company asset held. The resultant 3 percent net margins are nothing to be envious of.

The upcoming year will not be a delight either, even if retention prices remain strong. High constructions costs are nearly prohibitive for new private sector developments and spending. Public sector development spending is also down, though, flood related reconstruction and rehabilitation may boost demand in the interim. At the same time, recovery in key export markets is not visible on the horizon which would further place the burden on domestic demand to deliver.