PIOC: Lower retention prices turns bottom-line red
Pioneer Cement Limited (PIOC) announced its results earlier today, posting loss after tax of PKR 412mn (LPS: PKR 1.81) during 3QFY20 against earnings of PKR 298mn (EPS: PKR 1.31) during same period last year. The result is above our expectations where main deviation emanated from lower than anticipated recognition of finance cost.
On cumulative basis, net sales for the period declined by 20% YoY to PKR 5.98bn. We suspect i) lower retail prices, ii) higher dealer margins and iii) higher energy cost depleted gross margins to -6% against 24% in the same period last year.
Local dispatches for the company increased to 1.14mn MT, 14% up on YoY compared to 12% surge in industry dispatches for the northern region.
Distribution expense clocked in at PKR 235mn during 9MFY20, 77% increase on YoY. This surge in distribution cost was in-line with uptick in dispatches and logistic costs.
Main deviation, however, came from lower than anticipated finance cost. We suspect that the company has continued to capitalize its finance cost against our expectations.
We have a BUY stance on the stock as the company is likely to be the primary beneficiary of recent cement price increase in north and declining interest rates.
Co. is engaged in the manufacture and sale of cement and clinker.
BMA is amongst the leading financial groups in Pakistan. BMA Capital’s core areas of business include Capital Markets, Corporate Finance & Advisory, Asset Management, and Financial Products Distribution. BMA Capital is the leader in privatisation advisory in Pakistan, having successfully advised on over 50% of all privatisations in Pakistan, by value, in transactions valued in excess of US$4 billion. Recent transactions include joint lead managing the $813 million GDR Offering of 10% of OGDCL on the London Stock Exchange in 2006-07, and advising Etisalat on their successful acquisition of a 26% strategic stake in Pakistan Telecommunications Company Limited (PTCL) for US$2.6 billion, the largest M&A transaction and foreign direct investment in Pakistan’s history. The firm is among the top brokers in the Pakistan equity and treasury markets, and is among a handful of firms that comprehensively cover all segments of the capital markets. This is supported by a very strong and independent research capability, which is quoted regularly in both local and international media. BMA Capital’s retail brokerage brand, BMA Trade, has launched a nationwide network of branches as well as a comprehensive online trading platform, enabling investors across Pakistan to take part in the capital markets.
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