Pakistan’s listed cement sector reported earnings of Rs30.91 billion, marking a 60% increase year-over-year (YoY) but a decline of 8% quarter-over-quarter (QoQ). In the fourth quarter of FY25, sales for the cement sector remained relatively stable on a QoQ basis, with a 5% YoY increase to Rs167.8 billion. The decrease in sector revenue on a QoQ basis was attributed to a 6% decline in domestic dispatches, according to a report by Topline Pakistan Research.

– Export dispatches rose by 33% YoY but decreased by 55% QoQ to 2.7 million tons in 4QFY25.
– For FY25, domestic dispatches fell by 3% YoY, while export dispatches increased by 29.5%, reaching 9.2 million tons.
– Average bag prices in the North increased by 4% QoQ to Rs1,413 in 4QFY25 (compared to Rs1,360 in 3QFY25), while prices in the South rose by 3% QoQ to Rs1,420 (from Rs1,382 in 3QFY25).
– Gross margins in the sector increased to 34% in 4QFY25 (up from 29% in 4QFY24) and rose by 4 basis points (bps) on a QoQ basis, driven by lower coal prices and a cost-efficient energy mix.
– In FY25, gross margins expanded by 3.9 percentage points, reaching 31.9% compared to 28% in FY24.
– During 4QFY25, cement producers in the southern region primarily used Richards Bay coal, whereas those in the northern region relied on a combination of Afghan and local coal (Darra).
– Notably, in 4QFY25, major cement players began integrating alternative fuels (biomass) into their fuel mix, accounting for around 5–10% alongside coal, which contributed to significant fuel cost savings and improved gross margins.
– Richards Bay coal prices fell by 16% YoY and 6% QoQ to USD 90 per ton in 4QFY25.
– Other income for the sector dropped by 50% YoY and 48% QoQ to approximately Rs7.8 billion in 4QFY25, mainly due to the absence of a Rs6.0 billion dividend from Lucky Cement’s wholly owned subsidiary, Lucky Electric Power (LEPCL).
– It is noteworthy that Lucky Cement (LUCK) comprised 26% of the cement sector’s total other income.
– The cement sector reported EBITDA of Rs55 billion, representing a 25% YoY increase and a 12.6% QoQ increase in 4QFY25.
– The EBITDA margin for the sector stood at 32.8% in 4QFY25, compared to 27.6% in 4QFY24 and 29.1% in 3QFY25.
– The finance cost for the sector reached Rs4.9 billion in 4QFY25, down by 50% YoY and 21% QoQ, attributable to monetary easing, which allowed cement players to deleverage their balance sheets.
– The sector’s effective tax rate was 33.1% in 4QFY25, down from 47.9% in 4QFY24 and 29% in 3QFY25.
– For FY25, profitability increased by 52% YoY to Rs1,233 billion, driven by improved retention prices, rising gross margins, and lower finance costs.
– LUCK, BWCL, and FCCL collectively contributed 52% to the sector’s overall profitability.
– BWCL stood out as the leading contributor, accounting for 20% of the cement sector’s profitability in 4QFY25, as its profitability rose by 83% YoY, driven by a 53% decline in finance costs and a tripling of profits from associates. On a QoQ basis, profitability increased by 4% due to lower finance costs and an increase in gross profit.
– LUCK represented 19% of the cement sector’s total profitability in 4QFY25, posting earnings of Rs5.7 billion, a 39% YoY decline primarily due to a 73% drop in other income. On a QoQ basis, LUCK’s profitability decreased by 57% due to a decline in other income and net sales.
– FCCL contributed 13% to the cement sector’s profitability in 4QFY25, with earnings of Rs3.9 billion, a threefold increase YoY, supported by higher net sales, improved gross margins, and a decline in effective tax rate.
– FCCL’s gross margins improved to 39% in 4QFY25, up from 36% in 4QFY24, primarily due to an efficient energy mix and lower coal prices.
– For comparison, Maple Leaf Cement (MLCF) achieved gross margins of 40% in 4QFY25, the highest in the cement sector.
– Collectively, LUCK, BWCL, and FCCL accounted for 57% of the cement sector’s profitability in FY25, with contributions of 27%, 19%, and 11%, respectively.

**Outlook:** We expect profitability to improve in 1QFY26, indicating a positive start to the year. This improvement will likely be driven by stronger domestic and export demand, declining coal prices, an enhanced energy mix, and improved retention prices. We maintain our overweight stance on the cement sector, with LUCK, FCCL, and MLCF as our top picks.