Cherat cement (PSX: CHCC) has certainly come a long way in the outgoing fiscal year from just five years ago in FY20 when it was in losses. And after slight improvements in the two preceding years, Cherat’s profits have substantially rebounded; up 25 percent in FY24 year on year. This is an achievement mostly because the company has witnessed shrinking demand, and relies heavily on its primary business of cement manufacturing to make money.

In 9MFY24, the company’s volumetric dispatches dropped 11 percent, with domestic sales down 14 percent, saved only by growing exports, up 18 percent. This led to a 1 percent increase in revenues during the period. Rising retention prices have remained the single biggest reason that cement manufacturers are turning profits. Estimating Cherat’s revenue and costs per ton sold in 9M based on its official reports suggest that the former rose 13 percent during the period, vs. costs that rose 9 percent. This led to an uptick in margins.

In the full year FY24, the total revenue growth of 3 percent is likely resulting from stronger pricing yet again, rather than improved domestic demand which has remained taciturn. Prices in the northern market where Cherat’s plants are located have had quite a rally over the past year, more so in recent months than earlier. At the same time, Cherat’s exports have been growing as their viability has increased which again has contributed to the improvement in financials. In 9M, exports share in total dispatches was 13 percent vs last year’s 10 percent. This difference has widened in the full year.

Margins in FY24 stood at 31 percent (from FY23’s 27%) with a number of factors working alongside each other starting from pricing with better coal inventory management and efficient power thrown into the mix. Strong margins trickled down to a profit margin of 14 percent in FY24, up from 12 percent. Not only did the company keep its overheads in check (3% of revenue), but its finance costs also dropped to 4 percent of revenue as the company paid off a lot of its long-term debt, scheduled and otherwise.