CHCC's net profits soar by 39% YoY

August 26, 2022 (MLN): The net profits of Cherat Cement Limited (CHCC) for FY22 have soared by 39% YoY to stand at Rs4.45 billion (EPS: Rs22.93), compared to Rs3.2bn profit recorded in FY21.

Alongside financial results, the company announced a cash dividend of Rs3 per share i.e., 30% for FY22.

Going by the financial statement of the company, the jump in the bottom line is due to improved dynamics in the construction sector, higher retention prices due to multiple price hikes in the local market and lower financial costs.

During the period under review, the company witnessed robust growth in topline as it went up by 27.3% YoY to Rs32bn while the cost of sales only increased by 25% YoY.

The gross margins clocked in at 28% compared to 27% in FY21 as effective use of coal inventory coupled with an increase in retention prices have helped CHCC to post decent gross margins.

Drilling further, distribution expenses have increased by 23% YoY to Rs529mn in FY22 amid a surge in transportation expenses while finance cost declined by 10.8% YoY mainly due to de-leveraging of debt (short-term).

Meanwhile, the effective tax rate came in at 35% compared to 26% in FY21 due to one-off super tax implication.

Overall, despite significant cost pressures amid elevated international energy prices, coupled with super tax imposition, CHCC has managed to post decent margins and net profits in FY22.

According to the report by Intermarket Securities, gross margins of CHCC are likely to normalize going forward, but earnings are likely to decline amid lower demand owing to the monsoon season and extended eid holidays in 1HFY23. However, the local demand and earnings will likely rebound post-winter. 

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