After a complete plummet, Pakistan’s cement industry is seeing healthy margins again. What prompted the comeback?

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.