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AKD Securities Limited – Off the Analyst’s Desk (November 22, 2022)

Karachi, November 22, 2022 (PPI-OT): PIOC: FY1QFY23 Analyst Briefing Takeaways

Pioneer Cement Limited (PIOC) organized its analyst briefing today to discuss 1QFY23 results and company’s future outlook.

To recall, PIOC posted PAT of PkR586mn (EPS: PkR2.58), up 22%YoY. Company posted GMs of 23% during the quarter vs. 24.8%/23.6% during 4QFY22/1QFY22.

Offtakes for PIOC 1QFY23 stood at 634k tons, down 18.6% on a YoY basis. Capacity utilization for the quarter stood at ~48.8%. Management expects overall industry dispatches to remain down by 10-15% during FY23.

Current retention price for company is around ~PkR13k/ton. Management also commented on transportation cost to the Southern region, stating that it is around is ~PkR60/bag or PkR1200/ton. Although, company’s sales in the southern region is negligible at this point.

Company’s current power mix is comprised of grid (30%), WHR (20-25%) and rest is fulfilled by CFB generation. Average cost of grid stood at ~PKR32.5/kwh for 1QFY23. To note, one ton of cement production consumes 90kwh, as per management.

Company’s coal mix is comprised of 50% Afghan coal and rest is a mix of local/imported coal. Average coal prices for the quarter were as follows: Afghan coal PkR54k/ton and local coal PkR32k/ton. Weighted average cost of coal stood at PkR45k/ton for the quarter. Company carries one month of coal inventory.

Regarding calorific value of different coals, Afghan coal’s heating value stands at 6000 kcal/ton vs. local coal’s 5600 kcal/ton. Also, 120-125kg of coal is required to produce one ton of cement, as per management.

Regarding future price wars in light of increasing capacities in the industry, management claims they do not foresee any pressure on the pricing front. Regarding future CAPEX, company has several expansion plans in line although said projects are still in early stages.

Regarding future debt financing, company has arranged PkR2bn (KIBOR + 0.7%) to retire costly long term debts. Company plans to refinance further long term debt obligations towards lower mark-up rates. As per management, they expect finance cost to land somewhere around PkR3.5bn for FY23.