LAHORE: Cement makers are unlikely to increase any prices in the near future to avoid any scrutiny by Competition Commission of Pakistan (CCP), the industry sources revealed.
Talking to Pakistan Today, sources said that following the development of previous pending case of penalties imposed on cement makers for alleged cartelization by CCP, chances of a price hike are minimal now at least for 3 months. On the other hand, they said that cement manufacturers, particularly of the Northern region, have decreased the prices from 10 to 13 per cent from their peak seen in June this year, giving hints that any price hike may invite scrutiny by CCP.
The CCP has imposed a fine of Rs6.3 billion on 22 cement manufacturers in 2009 on grounds of suspected cartelization. The penalty was later challenged in high court where the application has now been rejected and diverted to CCP tribunal for review.
Sources also said that in case of a negative tribunal decision, provisioning for the penalty would be required to be recorded in books of the cement companies involved. However, they said that option of an appeal in the Supreme Court (SC), against the decision, remains open for cement manufacturers.
Sources said that any tangible payments in the near to medium-term seem doubtful.
They also said that gross profit of the sector came down by 13 per cent to Rs20.9 billion against Rs24.05 billion and the gross profit margin reduced to 32.4 per cent against 41.2 per cent on a yearly basis in the first quarter of FY-2018 previously.
They also informed that the profit, after taxation of the cement sector, fell by 3 per cent to Rs13.74 billion against a PAT of Rs14.11 billion in FY-2017. However, the lower effective taxation did provide some support, they added.
According to the sources, the sector got a major hit by a drop in gross margin as the net revenue of the sector hiked by 11 per cent in the first quarter of FY-2018 to Rs64.55 billion, against a net-revenue of Rs58.30 billion in the similar period of 2017.
Though the cement prices remained low, the growth in revenue increased following the domestic sales volume, they said. The cost of sales observed significant hike as it surged by 27 per cent in first quarter of FY-2018 to Rs43.64 billion, against Rs34.25 billion in the first quarter of FY-2017, owing to higher coal prices.
They hoped that the growth would stay positive, however, the bottom-line posted 16 per cent growth to Rs13.74 billion as against Rs11.84 billion previously. They attributed the growth in earnings to lower effective taxation and higher domestic sales.