Fauji Cement Reports a Loss for the First Time in More Than a Decade

Fauji Cement Company Limited, which is one of the biggest cement manufacturers, has announced its financial results for the year that ended on June 30, 2020.

The company has reported a loss of Rs. 59.38 million during FY20, the first time in more than a decade. It had reported a profit of Rs. 2.82 billion during FY19. The erosion of profit was due to depletion in gross margins on the back of lower retention prices in local and export markets and weak demand during COVID-19 lockdowns.

Fauji’s sales were down by 17.15% to Rs. 17.23 billion as compared to Rs. 20.79 billion in the same period of last year due to the decline in volumetric sales and lower retention prices The cost of sales of the company was increased by 7.20% Rs. 16.58 billion as compared to Rs. 15.47 billion.

This took the gross profit to Rs. 649 million, down by a massive 88% as compared to Rs. 5.32 billion.

During the last two-quarters of the FY20, the country had come to a complete standstill due to the outbreak of the COVID-19 pandemic and the steps taken to ensure the safety of the people of Pakistan, something which had badly hurt the industry and businesses.

Some of the specific impacts it had on the cement business were the abrupt stoppage of dispatches due to the non-availability of transport and closure of most of the projects and markets. The dispatches to Afghanistan, Fauji’s main export market, came to a complete halt with the closure of the Torkhum border during the last few months of the FY20.

Due to this, the company had to partially shut down the Lines of production and meet the limited requirement from existing clinker stock. However, it was resumed later on.

Suban Iqbal, a financial analyst told ProPakistani,

Despite a tax credit of Rs. 114 million, the result was below the expectations due to a higher financial cost and a double-digit (27%) decline in the volumetric sales. But for the upcoming financial year,  the conditions look very lucrative due to the construction package introduced by the government and lower interest rates.  This will likely lead to the building of new housing schemes in the country. The cement prices will also get better in the future.

Other income decreased to Rs. 36.13 million as compared to Rs. 92.94 million. Administrative expenses were increased to Rs. 468 million as compared to Rs. 415 million.

The finance cost of the company increased by 120% to Rs. 233.80 million as compared to Rs. 106.75 due to an increase in bank borrowings to meet the working capital requirements. Whereas the finance income was decreased to Rs. 48 million as compared with Rs. 55 million recorded in FY19.

On the flip side, the company booked a tax reversal of Rs. 114 million during FY20. It had reported a loss before tax of Rs. 173.26 million and after the tax reversal, the loss was minimized to Rs. 59.38 million during the above mentioned period.

Fauji reported a loss per share of Rs. 0.04 as compared to earnings per share of Rs. 2.05.

FCCL’s share closed at Rs. 22.46, down by Rs. 0.03 or 0.13%, with a turnover of 14.25 million shares on Monday.

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