Fauji Cement: Worst is behind though stagnation persists

FCCL: Earnings Report Analysis
9 Months Ending March 2024

Fauji Cement Company Limited (FCCL) recently released its earnings report for the nine months ending March 2024. While EPS (earnings per share) showed a slight decrease compared to the same period last year (Rs. 0.72 vs Rs. 0.77), sales remained relatively stable. Overall, the report suggests stagnation in earnings growth.

Gross profit margin also declined slightly compared to the previous quarter and last year, sitting at 28%. Similarly, EBIT in this quartet (earnings before interest and taxes) was substantially lower than the 2nd quarter of 2024 and slightly lower than the same quarter last year.

Company Notes and Positive Signs

However, the company's earnings release included some positive notes. The cement industry as a whole saw a 3% increase in dispatches for the nine months of FY24, reaching 34.50 million tons. This indicates continued growth in the market.

FCCL itself also experienced some growth. The company's dispatches increased by 1% to 3.79 million tons in the nine months of FY24. Additionally, net revenue rose to Rs. 59,400 million from Rs. 51,907 million in the same period last year.

Cost Control and Profitability: The company attributes its improved gross profit margin (31% compared to 30% last year) to better sales prices and cost optimization initiatives. These initiatives include using local coal, alternative fuels, and increased power generation, which helped control costs.

Despite increased financial costs due to expansion-related debt (Rs. 1,262 million), FCCL achieved a profit after tax (PAT) of Rs. 7,043 million, which is slightly higher than last year.

FCCL is currently trading at a market price of Rs. 20.60, within its 52-week range. The company boasts impressive returns, with a six-month return of 63.1% and a one-year return of 73.8%. Its price-to-earning ratio is 6.36, and its price-to-book ratio is 0.69. With a 35% free float and 2,453 million issued shares, FCCL commands a market capitalization of Rs. 51 billion.

For comparison, the KSE100 Index has achieved a year-to-date return of 11.68% and a one-year return of 75.70%. While FCCL's earnings growth has stagnated, its strong financial performance and market position are noteworthy.

https://dps.psx.com.pk/download/document/229752.pdf

FCCL: 3rd Qrt Earnings Release

Fauji Cement Company Limited (PSX:FCCL)

3rd Quarter - March 2023

EPS: Rs. 0.77, declining over 19% on the average EPS of the last four quarters. Earnings took a hit due to an exchange loss booked in financial costs.

Cash dividend, nil.

Price (Rs.)	1 Month	6 Month	1 Year
11.85	2.16%	-19.11%	-30.29%

FCCL: Fauji Cement

Fauji Cement: On its way to become the third largest cement company. Has 3 plant locations. The recent addition of 2mn tons at Nizampur has taken the capacity to 8.4mn tons.

Planned expansion at Dera Ghazi Khan of 2mn tons, is expected to commence operations by CY23 end. CapEx is estimated at Rs38bn financed with a Debt: Rs23bn & Equity: Rs15bn. Major portion with debt under TERF and LTFF arrangements. FCCL could only manage to secure Rs4bn under TERF and it will now not be able to avail LTFF rates for the upcoming expansion. This will have an impact of Rs800mn. 

40% of the equipment import is remaining.

FCCL fuel mix for 1HFY23: Afghan coal being 44% ,local coal  at 52-53% in the coal mix. Afghan coal prices are  around Rs52-55k/ton, while local coal is at Rs33-35k/ton. Landed cost for imported coal comes to around Rs60-62k/ton.

current coal cost ia around Rs42-43k/ton compared to around Rs 38k/ton in 2QFY23.

More at: FCCL - Stock quote Pakistan Stock Exchange (PSX)