Pakistan’s Cement Sector Shows Strong Growth Despite Margin Pressures

KARACHI: The cement sector in Pakistan experienced significant growth in the first quarter of fiscal year 2026, as reported by a sample of eight companies. The sector saw a substantial 56% year-on-year increase in standalone earnings, driven by a 17% rise in dispatches and improved export prices. A notable 56% decline in financial charges due to lower interest rates and deleveraging efforts further boosted earnings.

Quarter-on-quarter profitability also rose by 27%, primarily due to a 7% increase in dispatches and higher dividend income, with examples such as Lucky Cement receiving approximately Rs6 billion from its investment in Lucky Electric Power Company Limited.

Despite these gains, the sector faced challenges with gross margins dipping by 1.8 percentage points compared to the previous quarter. This decline was attributed to lower retention prices, particularly in the North region, where a decrease in prices and discounts led to a reduction in retention earnings.

JS Global maintains an overweight position on the sector, encouraged by a 15% year-on-year recovery in dispatches and favorable coal prices. However, the report highlights that declining market retail prices, especially in the North, pose a risk to the sector’s margins.

The findings underscore the delicate balance the cement industry must maintain between growth and profitability, as it navigates market dynamics and pricing pressures.