JS Securities Limited - JS Research (October 15, 2021)

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JS Securities Limited – JS Research (October 15, 2021)

October 15, 2021

Karachi, October 15, 2021 (PPI-OT): Attock Cement: Briefing session key takeaways

Attock Cement Limited (ACPL) held a briefing session yesterday to discuss FY21 results and outlook of the company. We present key takeaways from the session.

Attock Cement (ACPL)’s FY21 core business’ profitability was flat YoY at Rs1,107mn (EPS: Rs8.06) whereas consolidated earnings of the company in FY21 stood at Rs2,379mn (EPS: Rs13.61) vs. Rs2,567mn (EPS: 14.43) in FY20, a 7.3% decline YoY. Along with the result, the company announced a final cash dividend of Rs4/share.

The management of ACPL believes that coal prices will remain high till Feb- 2022. Company’s average coal inventory at present costs US$125- US$130/ton, while the company plans to maintain 3-4 month inventory as it expects coal prices to rise further. ACPL is also now planning to move toward using local and Afghan coal similar to its peers.

Local retention prices for the company presently are around Rs9,000/ton (Rs450/bag) after the recent price hikes. On the other hand, contribution margin from exports is negative and the company is exporting just enough to maintain a footprint in the regions it exports to. Clinker prices in the region are around US$35/ton FOB.

The company expects its 20MW solar plant to come online by 2QFY22 which will help it reduce power costs.

The cement sector has been facing rising input costs and freight charges for the past several months. The company acknowledged that it has shut down the relatively inefficient Line-1 due to subdued local demand in recent months.

Royalty charges in the Southern region have increased in recent months to Rs200/ton from Rs120/ton previously. Packaging costs have also increased ~25% during the year.

The company targets 1QFY24 for the CoD of its upcoming Line-4. A loan of Rs9.7bn has been arranged for the same, out of which ~Rs5bn is under LTFF and Rs4.7bn under TERF facility of SBP. The loan has tenure of 10 years with a 2-year grace period. The management is of the view that capacity expansions in the sector have been planned at the right time.