Maple Leaf Cement Factory Ltd. (MLCF), the Pakistani building-material maker with the most debt, may record the highest profit in six years as prices rise and lower interest rates reduce loan payments.
Earnings per share may rise to about 3 rupees in the year ending June 2013, Waleed Tariq Saigol, a member on the company’s board of directors, said in an interview in Lahore yesterday. The company’s EPS in the previous 12 months was 0.84 rupee. Maple, whose shares have risen sevenfold this year, reported an EPS of 3.38 rupees a share in the year ended June 2006.
Rising cement prices in Pakistan are helping makers of the material to cope with sluggish sales that fell 1.5 percent to 13.4 million tons in the four months ended Oct. 31, according to the All-Pakistan Cement Manufacturers Association. The average price of a 50-kilogram bag of cement may increase to 440 rupees by June, after rising 20 percent to 421 rupees in the last financial year, according to Elixir Securities Ltd. in Karachi.
Maple Leaf plans to reduce its debt to 13 billion rupees ($135 million) in the year ending June, from the 16 billion rupees it owes to banks for expansion since 2005, Saigol said. Lower interest rates have helped reduce financial charges after the central bank reduced borrowing costs for a second meeting last month.
“This year is going to be a good one for Maple,” said Sateesh Balani, a research analyst at Elixir. “Even a modest capacity utilization level of 70 percent will help the company make good earnings on the back of strong cement prices.”
The company’s shares rose as much as 7.7 percent by the daily limit of one rupee to 14.02 rupees at the close of trade in Karachi, the highest since June 2008. It was the third-most traded stock with volume four times the three-month daily average, according to data compiled by Bloomberg. The stock has risen over sevenfold this year compared with a 46 percent increase in the benchmark KSE100 Index.
“In the last month or so, we have been seeing some foreign” investors showing interest, said Saigol. “A huge European asset management company” has shown interest, he said, without giving details.
Domestic cement sales may rise by about 5 percent in the year ending June as President Asif Ali Zardari’s administration seeks to boost public spending ahead of general elections scheduled for early next year, Balani said.
The opening of trade between Pakistan and India will “benefit Maple the most,” Saigol said, since its plant is located at Mianwali in the Punjab province, 190 miles (306 kilometers) from the border.
If trade with “India really picks, we will have the greatest advantage,” he said, adding his company can “easily sell” as much as 60,000 tons of cement a month to its neighbor.
The nuclear-armed neighbors that have fought three wars since independence in 1947 signed an accord in September to ease visa restrictions and boost business travel and trade across the border.
Maple Leaf has the capacity to produce 3.37 million tons of cement a year, the fifth-biggest after Lucky Cement Ltd., D.G. Khan Cement Co., Bestway Cement Ltd., and Fauji Cement Co. Maple has increased its capacity from 1.5 million tons a year in 2005.
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