Maple Leaf Cement Factory : Transmission of Quarterly Report for the Period Ended 31.12.2022

H A L F Y E A R L Y R E P O R T

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CONTENTS

COMPANY INFORMATION

DIRECTORS' REVIEW

In compliance with Section 237 of the Companies Act, 2017, the Directors of your Company have pleasure to present unaudited standalone and consolidated financial statements for the first six months of financial year 2022-23, ended 31st December 2022.

During the period under review, the Company recorded net consolidated turnover of Rs. 30,051 million against Rs. 22,101 million in the corresponding period last year. The top line of the Company increased by 36% due to improvement in selling prices in the local market. Increase in selling prices is mainly due to high inflationary impact on cost side, especially fuel and power. Devastating floods have hit the country during the period under review and adversely impacted cement dispatches which in turn affected growth of the construction sector. This is in addition to lackluster implementation of large-scale projects, low utilization of PSDP budget and reduced demand in housing sector due to high cost of borrowings which have impacted the growth of the sector negatively.

Comparative data of capacity utilization and cement dispatches for the period under review is as under:-

Total Sales volume of 2,113,862 tons achieved depicts a decrease of 12.16% over 2,406,609 tons sold during the corresponding period last year. Domestic sales volume was 2,049,598 tons depicting almost the same level of demand due to reasons discussed above. Political instability causing uncertainty is another major factor contributing to negative growth of the construction sector.

The Company's export volumes decreased by 8.22% to reach 64,264 metric tons from 70,020 metric tons in corresponding period. Exports have not picked up post the American exodus from Afghanistan. This has resulted in slowing down of the economy and banking restrictions are another major reason for decline in export sales. Cement dispatches to rest of world were not feasible due to high production costs in Pakistan as compared to global markets and increased shipping costs, impacting competitiveness in the regional markets.

During the six months' period under review, global coal and oil prices remained high mainly because of ongoing war between Russia and Ukraine that has impacted the supply of oil from Russia which in turn caused prices of commodities to increase further. However, the

Company was able to keep its fuel and power costs under control by procuring local coal at cheaper rates. The Company is also benefitting by use of pet coke which is cost effective due to higher energy content and inventory of imported coal and pet coke at affordable rates.

The Management of the Company has initiated cost control measures and adopted various strategies in all areas including use of alternative fuels and optimized operations of the plant with a specific focus to reduce fixed costs.

The Company was able to avoid the potential adverse impact due to hikes in electricity tariff by NEPRA by relying on own power generation sources i.e., coal fired power plant (CFPP), Solar Power Plant and Waste Heat Recovery Plant which is the cheapest source of electricity for the Company. Waste Heat Recovery Plant is now representing one third of the power mix of the Company. All aforementioned cost saving measures have contributed towards higher margins as compared to corresponding period last year.

On account of aforementioned factors impacting cost of production, the Company achieved consolidated gross profit of Rs. 9,331 million during the reporting period, an increase of 54% from Rs. 6,076 million in the corresponding period last year.

The Company recorded consolidated pre-tax profit of Rs. 6,058 million for the reporting period against consolidated pre-tax profit of Rs. 3,732 million in corresponding period. Consolidated tax component amounted to a charge of Rs. 1,750 million for the reporting period as compared to Rs. 974 million in the corresponding period.

Profits earned from MLPL are exempt from charge of income tax and amounted to Rs. 777 million for the first six months of financial year 2022-23.

The above factors have increased post-tax bottom line for the reporting period at a consolidated profit of Rs. 4,308 million as against Rs. 2,757 million for corresponding period last year representing an increase of 56%.

During the period under review, monetary policy rate was reviewed by the State Bank of Pakistan (SBP) and enhanced from 13.75% to 15.00% in July 2022 and further enhanced to 16.00% in November 2022. Due to this raise, the Company's finance cost has increased during 1st half of the financial year as compared to corresponding period. Policy rates got yet further enhanced by SBP in January 2023 from 16.00% to 17.00% which will further increase the finance cost of the Company from Q'3 onwards. The Temporary Economic Refinance Facility (TERF) and Long Term Finance Facility (LTFF) launched under the directives of the SBP have lent sustainable financial support to the Company by helping it avail long term borrowing at attractive mark-up rates to purchase imported plant and machinery and setting up new projects. However, disbursements under TERF and LTFF by SBP during the first half of financial year remained on hold due to which the Company was unable to convert a significant portion of its borrowing under those schemes.