Cement Sector rebounds in FY26, demand momentum expected to build further

September 16, 2026 (MLN): The cement sector showed stable performance in the fiscal year 2026, as it continued to transition from stabilization towards growth.

The KSE-100 listed sector recorded a 13% YoY growth in net profits, which clocked in at Rs143bn as against Rs126bn in the previous fiscal year.

LUCK, BWCL, and FCCL collectively represented 62% of the cement sector’s total profitability in FY26.

LUCK stood out as the leading contributor, accounting for 33% (Rs46,629m) of total sector earnings, driven by higher net sales, elevated other income of Rs27,977m, and lower finance costs.

BWCL contributed 18% (Rs25,757m) to sector profits up 8% YoY supported by a 30% reduction in finance costs alongside a strong share of profits from investees.

FCCL rounded out the top three, accounting for 11% (Rs16,183m) of sector earnings, posting a 21% YoY gain on higher net revenue and reduced finance costs.

Conversely, MLCF saw its full-year earnings drop 50% YoY to Rs8,446m, as its finance costs surged 26% YoY to Rs4,490m due to debt servicing obligations related to the acquisition of PIOC.

KOHC recorded an 8% drop in annual net profits to Rs10,697m, though its performance held steady overall.

Fiscal year 2026 has so far remained largely conservative on the economic front, with GDP growth recovering to 3.7% the highest in four years while structural reforms under International Monetary Fund (IMF) programs led to widespread impact.

Average inflation stood at 7.05% during the year, allowing the State Bank of Pakistan (SBP) to lower its policy rate to 10.5% in December 2025 before adjusting it to 11.5% in April 2026 to keep inflation expectations anchored while supporting economic activity.

As per the results compiled of the income statements of the twelve KSE-100 listed cement companies, the sector saw a growth of 8% YoY in its sale revenue, worth Rs715,497m as compared to Rs664,330m in SPLY.

Lucky Cement remained the market leader in revenue generation, contributing 19% of total sector turnover with sales of Rs136,527m, while Bestway Cement and Fauji Cement followed with 15% (Rs108,282m) and 13% (Rs93,690m) shares respectively.

To note, the compiled sector result includes LUCK, BWCL, CHCC, DGKC, KOHC, FCCL, ACPL, MLCF, PIOC, GWLC, FECTC, and POWER.

The overall cement industry’s total dispatches were recorded at 51 million tonnes during the fiscal year, up 7% YoY, according to All Pakistan Cement Manufacturers Association (APCMA) data.

The review period's cement dispatches were affected by geopolitical tensions in the Middle East, high energy costs, and monsoon season fluctuations.

Domestic dispatches grew 10% YoY while exports fell 2% YoY during the review fiscal year.

However, stable sales prices, PKR appreciation against the US Dollar, and higher domestic offtake offset export declines as sales grew steadily.

On the cost front, the cost of sales grew by 9% YoY, which expanded the gross profit by 6% YoY to Rs227,993m in FY26.

The gross margins of the sector slightly adjusted to 32% as compared to 32% in SPLY.

On the expense side, the sector's selling and distribution expenses rose 4% YoY to Rs30,815m, while administrative expenses rose 24% YoY to Rs17,682m.

Lucky Cement accounted for the largest share of selling and distribution expenses at Rs8,988m (29% of sector total), while Bestway Cement posted the highest administrative costs at Rs3,149m (18% of sector total).

The sector's finance cost fell by 31% YoY and stood at Rs20,541m as compared to Rs29,884m in SPLY, mainly due to lower benchmark interest rates during the year.

On the tax front, the sector paid a higher tax worth Rs62,150m against the Rs60,287m paid in the corresponding period of last year, depicting a rise of 3% YoY.

Cement Sector’s Financial Highlights (Rupees in '000)

Outlook

Pakistan’s economic outlook remains cautiously optimistic, supported by improving macroeconomic fundamentals, continued engagement with the International Monetary Fund (IMF), and the government’s commitment to structural reforms.

A relatively stable exchange rate, strengthening foreign exchange reserves, and sustained inflows of workers’ remittances provide a foundation for economic resilience.

The Federal Public Sector Development Programme (PSDP) allocation of Rs1,000 billion, together with policy measures supporting housing finance, infrastructure development, and targeted incentives under the federal budget, is expected to provide impetus to economic activity.

Real GDP growth is projected to pick up further to 4.0%, while inflation is expected to settle between 8.2% and 8.3%, creating room for further monetary easing.

"Domestic cement demand is expected to build upon the recovery witnessed during FY2026, supported by infrastructure spending, housing sector incentives, and an improving interest rate environment," said Lucky Cement Limited (PSX: LUCK).

The company noted that the inclusion of Non-Banking Finance Companies (NBFCs) in subsidized housing finance programs has widened credit access for consumers, further sparking domestic cement consumption. Moreover, expansion in international cement operations continues to present attractive growth opportunities, including new grinding and integrated lines in regional markets like Samawah, Iraq, and the Democratic Republic of Congo (DRC).

However, energy costs remain a key variable affecting profitability across the board. Escalation in geopolitical tensions in the Middle East, high fuel costs, potential increases in international coal and pet coke prices, and the choking of critical maritime routes may place pressure on operating margins.

Fauji Cement Company Limited (PSX: FCCL) stated that while the cement sector enters the upcoming year on a solid footing with domestic volumetric growth projected at approximately 8%, it faces notable challenges.

"These include persistently low capacity utilization, elevated energy costs driven by international supply chain disruptions, high indirect taxation, and the pressing need to develop alternative export markets to offset the decline in trade with Afghanistan," the company noted.

Meanwhile, Maple Leaf Cement Factory Limited (PSX: MLCF) projected a favorable outlook for local cement demand driven by government infrastructure initiatives and a resurgence in real estate.

To offset fuel cost volatility, MLCF stated: "The Company will keep focusing on lowering its costs to improve margins... through a sustainable supply chain for alternative fuels, which is expected to deliver significant cost savings and support profitability."

Similarly, Bestway Cement Limited (PSX: BWCL) highlighted that while Pakistan continues to face a fragile geopolitical landscape and global supply chain disruptions, gradual recovery in construction activity positions the sector well to seize emerging opportunities and deliver sustainable growth.

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