KARACHI: Pakistan cement sector profits may drop 7% in 3QFY26 as rising coal costs and lower other income squeeze earnings. Despite a double-digit jump in sales, the sector’s bottom line is feeling the heat from disappearing dividend income and a volatile global energy market.
The Profit Paradox: Why Numbers Are Turning Red
According to the latest projections for the Topline Cement Universe, profitability will likely slide to Rs21.1 billion, down from Rs22.8 billion during the same period last year. This 7% dip stems primarily from a massive hole in “Other Income.” The absence of a dividend from Lucky Electric Power Company (LEPCL) which buoyed figures last year has significantly dampened the sector’s financial performance.
Quarterly profits may fall by 4% as higher imported coal costs and a temporary slowdown in construction activity during Ramadan and Eid weigh on earnings.
Rising Coal Prices Hammer Pakistan Cement Sector Profits
While manufacturers raised cement prices by Rs30–60 per bag this quarter, the hike barely offsets the rising cost of production. Geopolitical tensions continue to push energy costs higher, with Richards Bay coal averaging US$100 per ton in 3QFY26, compared to US$86 in the previous quarter.
Consequently, the industry’s average gross margins will likely shrink to 32%, down from 34% in the preceding quarter. Although companies are selling more, they are keeping less of every rupee earned as fuel and power costs eat into their earnings.
The Export Silver Lining
The sector isn’t without its bright spots. Analysts forecast net sales at Rs111.1 billion, registering an impressive YoY growth rate of 20%. The company registered a sharp rise of 9% in total dispatches amounting to 13.24 million tons.
Although there was only a mild YoY rise in domestic sales, exports witnessed an explosive performance, growing by 35%. It clearly shows that the industry is striving to ensure capacity utilization of 58%.
Corporate Developments: The Maple Leaf Decision
There has been an unprecedented development within the cement industry in the third quarter. Maple Leaf Cement Factory Limited managed to acquire 70% equity in Pioneer Cement Limited. This power move significantly strengthens Maple Leaf’s footprint in the North region. Due to this consolidation, MLCF expects a 26% YoY increase in consolidated earnings, even as its gross margins face pressure.
Mixed Bag for Market Leaders
- Lucky Cement (LUCK): Though unconsolidated profits could be down 41% owing to the absence of the LEPCL dividend, consolidated EPS is projected to rise 29% YoY thanks to robust car sales and overseas business.
- Fauji Cement (FCCL): FCCL is expected to show itself to be a star performer, recording a phenomenal 98% YoY earnings increase owing to an 19% hike in sales and finance expenses decline.
- DG Khan Cement (DGKC): DGKC should see its EPS grow 56% YoY thanks to increased shipments and reduced finance expenses.
- Kohat Cement (KOHC): With more challenging headwinds ahead, KOHC sees its earnings decreasing by 7% YoY owing to rising fuel prices.
As the industry navigates a complex web of high energy costs and shifting domestic demand, all eyes remain on international coal trends and the potential for a dividend “surprise” from LEPCL that could yet flip the sector’s fortunes.
