The Lahore High Court’s larger bench has ruled against Punjab-based cement manufacturers, directing them to pay a 6 percent royalty on retention prices related to raw material costs.

Previously, these manufacturers had been accounting for raw material costs using the 6 percent formula but had secured a stay on actual payments by providing bank guarantees. With the court lifting this stay, these guarantees are now expected to be encashed.

Market analysts at Topline Securities said the verdict is likely to have a neutral impact in the medium to long term for companies that have already provisioned for this cost, including Maple Leaf Cement (MLCF), Pioneer Cement (PIOC), Fauji Cement (FCCL), and Bestway Cement (BWCL). DG Khan Cement (DGKC), which also operates in Punjab, will face similar implications.

Meanwhile, cement producers based in Khyber Pakhtunkhwa (KPK) continue to enjoy lower royalty rates of Rs. 350 per ton. This presents a significant cost advantage compared to Punjab’s 6 percent royalty on net sales prices, which could amount to nearly Rs. 1,000 per ton difference.

Companies such as Kohat Cement (KOHC), Cherat Cement (CHCC), Lucky Cement (LUCK), and Fauji Cement (FCCL) stand to benefit from this disparity. Many KPK-based manufacturers also sell part of their production in Punjab, potentially allowing them to offer more competitive prices and gain market share in a pricing-disciplined environment.