Fauji Cement Company Limited (FCCL) announced its 3QFY19 result where it posted a loss of PKR 210mn (LPS: PKR 0.15) against profit after tax (PAT) of PKR 189mn (EPS: PKR 0.20) in the previous quarter. The result was broadly in line with our estimates.

The company reported a gross loss of PKR 106mn translating to negative margins for the quarter as opposed to gross margins at 7% in the last quarter. We suspect lower retention prices and higher fuel cost driven losses for the quarter.

Depressed profitability led to lower gross margins that clocked in at 7% in 9MFY20 as opposed to 27% in SPLY. This is due to i) decrease in retention prices and ii) higher fuel expense. On the other hand, 34% increase in finance cost on QoQ basis also kept the bottomline under pressure. On cumulative basis finance cost increased to PKR 97mn in 9MFY20 translating into a hike of 97% over same period last year.

We expect ongoing quarter to also remain under stress due to lower economic activity amid lock downs and lower product demand during the month of Ramadan. (BMA Research).