Karachi, November 25, 2021 (PPI-OT): PIOC: Corporate briefing session key takeaways

Pioneer Cement Limited (PIOC) held its corporate briefing session yesterday to discuss the outlook of the company. We present key takeaways from the session.

Pioneer Cement Limited (PIOC) held its corporate briefing session yesterday to discuss 1QFY22 and FY21 results and the outlook. Primary reasons for the increase in company’s profitability were higher retention price and dispatches. Company reported gross margins of 23.6% and 18.9% for 1QFY22 and FY21, respectively.

PIOC plans to retire Rs4.5bn of its long-term debt in the ongoing fiscal year.

The company believes that higher coal prices are a major risk for the cement business’ margins in the coming quarters and also expressed concern over inability to fully pass on the impact to end consumer.

During the quarter, PIOC bought some coal at higher rates of ~US$190/ton as well and thus plans to use local coal in the mix to somewhat offset the impact. Company currently estimates average coal inventory cost to be ~US$160/ton and has inventory until December end.

Sea freight is hovering around US$20-25/ton while local inland freight is expected to be around Rs4,000/ton.

The company’s current power requirement is met by a mix of WHR (35%), Grid (32%) and the remaining through Coal power plants. Presently, Grid cost is around ~Rs20/unit.

Discussing about utilization levels, the company shared that it is running all lines and the usage will likely remain a key function of demand. Management shared that the company is selling 11-12k tons/day in the Northern region with retention prices of Rs8,500 – 9,000/ton.

For cement dispatches growth, management gave the guidance of 8-10% annual growth expectations while highlighting challenges on the export front.

The company isn’t actively working on any plans for expansion but is considering it.