MLCF: Rows back to profits amid incredible margins

April 21, 2021 (MLN): Maple Leaf Cement Factory (MLCF) has revealed its financial performance for 9MFY21, as per which the company reported a net profit of Rs2.8bn (EPS: 2.59/sh) against the net loss of Rs2.7bn (LPS: Rs3.2/sh) that the company incurred in the same period of last year (SPLY).

The stunning turnaround in profitability can be attributed to a sharp improvement in margins, higher local retention prices, lower interest rates, rising construction activities, and favorable macros.

Overall cement sector has so far remained bullish, with total sector sales up by around 17% to 43MTs in 9MFY21. MLCF has been no exception either. The company’s 9MFY21 sales volumes clocked in 3.6MTs maintaining its domestic market share to nearly 8%.

According to the report by IGI Securities, the company has been able to retain its top position in terms of retention prices thanks to the rising share of white cement in its sales mix (white cement contributes nearly 2-3% in sales mix whereas in value terms its about 10-15%. Maple holds a 95% market share in white cement.

Going by the financial statement of MLCF, the net revenues of the company jumped by 13% YoY which could be underpinned by a sharp increase in local retention prices. As a result, the company’s gross margins improved miraculously to 24% from 3% in SPLY as improved retention prices more than offset the impact of higher coal prices, keeping margins elevated.

On the expense side, distribution, admin, and other costs mounted by 13.8%, 22%, and 128% YoY respectively, while finance cost declined by 55.6% YoY due to lower interest rates,

The Other income of the company stood at Rs3.6bn during 3QFY21, presumed to be dividend proceeds from the subsidiary company.

On the taxation front, the company booked effective taxation at 22% during 9MFY21 against a tax credit of Rs126.8mn in SPLY.

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