With the result season around the corner, Sherman analysts have presented a preliminary earnings preview of our sample cement companies for 2QFY26. We expect profitability across our cement universe to decline by 13% YoY. Earnings are likely to remain subdued mainly due to: (1) lower retention prices, (2) lower exports, and (3) unavailability of Afghan coal. Furthermore, capacity utilization stood at 62% during 2QFY26 versus 59% during the same period last year. On a quarterly basis, sector earnings are expected to increase by 7% QoQ amid better volumetric sales (up 3% QoQ).Cement Profits Rise 60% in 4QFY25
Local Dispatches on Road to Recovery
During the quarter, local dispatches stood at 11.1mn tons (up 9% YoY), mainly due to increased construction activity. On a QoQ basis, local dispatches improved by 9%. On the other hand, cement exports declined sharply by 23% YoY, primarily due to the Afghan border closure, resulting in lower margins. We expect our cement universe topline to clock in at Rs84bn (down 13% YoY) in 2QFY26.
Gross Margins to Remain Subdued
We expect gross margins across our cement universe to settle at 32% compared to 35% during the same period last year. The downward trend in margins is mainly due to: (1) unavailability of Afghan coal, (2) lower exports, and (3) lower retention prices. On a quarterly basis, gross margins are expected to remain higher compared to last quarter amid lower imported coal prices and higher cement prices in the Southern region,” topline analysts.
FCCL is expected to post net earnings of Rs3.8bn (EPS Rs1.6), down 4% YoY. The decrease in earnings is mainly attributed to muted volumetric sales (up 1% YoY), lower retention prices, and lower gross margins. We anticipate gross margins to clock in at 34% during 2QFY26 versus 36% in the same period last year. On a QoQ basis, earnings are expected to increase by 18%.
MLCF is expected to post net earnings of Rs3.1bn (EPS Rs3.05), down 15% YoY. The decline in earnings is mainly due to lower retention prices and higher fuel and power costs. We anticipate gross margins to arrive at 31% compared to 35% during the same period last year. On a QoQ basis, earnings are expected to increase by 17% QoQ due to higher volumetric sales (up 13% QoQ) and lower imported coal prices.
DGKC is expected to post net earnings of Rs2.7bn (EPS Rs6.3), up 1% YoY. Earnings are broadly flat due to lower dispatches (down 10% YoY), offset by higher export prices and better export margins, as exports constitute 28% of total sales. This partially offsets higher coal prices due to the unavailability of Afghan coal. We anticipate gross margins to arrive at 26% compared to 25% during the same period last year. On a QoQ basis, earnings are expected to increase by 27% QoQ, mainly due to higher volumetric sales (up 5% QoQ) and a more efficient fuel mix.
CHCC is expected to post net earnings of Rs1.7bn (EPS Rs8.9), down 23% YoY. The decline in earnings is due to lower gross margins amid reliance on local coal. We anticipate gross margins to arrive at 31% compared to 36% during the same period last year. On a QoQ basis, earnings are expected to decrease by 17% QoQ.
