In the high-stakes world of cement, where margins are as vital as the product itself, the industry has experienced a dramatic roller-coaster ride over the past decade. Once a powerhouse of profitability with gross margins peaking at 42.2% in 2016, the sector found itself grappling with margins that plummeted to a perilous 4.79% by 2020. It was a huge fall from grace in a very short period of time.
However, recent data suggests a robust rebound, with margins climbing to 25% in 2023. The turnaround is dramatic. And there is a reason we are looking so closely at the margins.
A price surge with a bumpy ride
Cement prices have experienced a remarkable journey. Back in July 2012, a 50kg bag of cement cost Rs 435. Fast forward to September 2024, and that same bag now commands Rs 1510—a staggering 2.5-fold increase over 12 years. Yet, this upward trend wasn’t smooth. For nearly a decade, from 2012 to 2021, prices fluctuated between Rs 500 and Rs 640. It wasn’t until mid-2021 that prices shot up dramatically, climbing to Rs 1500 in just three years.
The dramatic drop in margins during the pandemic years can be attributed to stagnant prices amidst skyrocketing production costs. Companies were trapped in a vicious cycle of maintaining prices despite rising costs, due to weakened demand during the pandemic. As economic activity resumed, so did the capacity to increase prices, helping margins bounce back. The content in this publication is expensive to produce. But unlike other journalistic outfits, business publications have to cover the very organizations that directly give them advertisements. Hence, this large source of revenue, which is the lifeblood of other media houses, is severely compromised on account of Profit’s no-compromise policy when it comes to our reporting. No wonder, Profit has lost multiple ad deals, worth tens of millions of rupees, due to stories that held big businesses to account. Hence, for our work to continue unfettered, it must be supported by discerning readers who know the value of quality business journalism, not just for the economy but for the society as a whole.To read the full article, subscribe and support independent business journalism in Pakistan
