Pakistan cement sector posts Rs35.01bn profit in 2QFY26, margins decline

Pakistan’s listed cement sector posted a profit of Rs35.01 billion in the second quarter of FY26, remaining almost unchanged year-on-year but declining 6% quarter-on-quarter, according to a report by Topline Pakistan Research.

The quarter-on-quarter decline was attributed to a reduction in other income, while net sales remained flat on a yearly basis and rose 7% quarter-on-quarter to Rs192.1 billion in 2QFY26. The sequential growth in sales was driven by a 13% increase in domestic dispatches.

Export dispatches fell 23% year-on-year and 21% quarter-on-quarter to 2.04 million tons during the quarter. The yearly decline was mainly due to lower sea-borne exports and suspension of exports from the northern region amid political instability at the Afghan border.

Average bag prices in the North stood at Rs1,391 per bag in 2QFY26 compared to Rs1,360 per bag, remaining largely unchanged quarter-on-quarter. Prices in the South also remained stable on a quarterly basis. On a yearly basis, prices in the Northern region declined 2%, while in the South they increased 4%.

Gross margins narrowed to 32.4% in 2QFY26 compared to 34.2% in 2QFY25, bringing first-half FY26 margins to 31.1% versus 33.0% in the same period last year.

During the quarter, cement manufacturers in the southern region relied mainly on Richards Bay coal, while players in the North also shifted to Richards Bay coal due to unavailability of Afghan coal amid border issues. Richards Bay coal prices declined 23% year-on-year and 2% quarter-on-quarter to $85 per ton in 2QFY26.

Other income declined 14% year-on-year and 35% quarter-on-quarter to around Rs8.8 billion. The quarterly drop was largely due to the absence of a Rs6.0 billion dividend from Lucky Electric Power (LEPCL) to Lucky Cement. Lucky Cement accounted for 43% of the sector’s total other income.

Sector EBITDA stood at Rs60 billion, down 3% year-on-year but up 8% quarter-on-quarter. The effective tax rate increased to 32.2% in 2QFY26 compared to 22.8% in 2QFY25 and 29% in 1QFY26.

In the first half of FY26, sector profitability rose 22% year-on-year to Rs72 billion, supported by lower finance costs and higher other income.

Lucky Cement, Bestway Cement and Fauji Cement collectively contributed 52% to overall sector profitability in 2QFY26. Lucky Cement remained the largest contributor with a 25% share. Its profit rose 18% year-on-year due to a 36% reduction in finance costs and a doubling of other income, though it declined 41% quarter-on-quarter due to the absence of dividend income.

Bestway Cement accounted for 16% of total sector profit in 2QFY26, reporting earnings of Rs5.6 billion, down 24% year-on-year mainly due to a 77% decline in other income. On a quarterly basis, its profitability increased 2% due to higher sales and improved share of associate profits.

Fauji Cement contributed 12% to sector profitability, posting earnings of Rs4.0 billion, remaining flat year-on-year due to lower retention prices and higher fuel costs. On a quarterly basis, its profit increased 23% on the back of higher domestic dispatches.

All companies reported profits during the quarter except Dewan Cement, which posted a loss of Rs215 million in 2QFY26.

In 1HFY26, Lucky Cement, Bestway Cement and Fauji Cement represented 57% of total sector profitability, with individual shares of 32%, 15% and 10%, respectively.

Looking ahead, Topline expects year-on-year profitability to increase due to higher domestic offtakes, lower finance costs and declining coal prices. On a quarterly basis, profits are expected to remain flat amid lower construction activity during Ramazan and Eid holidays. The brokerage named Lucky Cement and Maple Leaf Cement as its top picks in the sector.