PAKISTAN: Cement export dispatches grow 7% in December

KARACHI: The improving law and order conditions in Afghanistan should provide expansion in cement export, besides casting positive stance on the sector.

According to All Pakistan Cement Manufacturer Association (APCMA), cement dispatches in December 2011 stood at 2.67 million tonnes against 2.49 million tonnes in the same period last year, depicting a growth of 7 percent year to year (YoY). 

Local sales grew by 13.1 percent YoY to 2.02 million tonnes while exports remained subdued, declining by 8.4 percent YoY to 0.65 million tonnes. 

On a MoM basis, cement sales have improved by 18.1 percent with domestic sales growing by an impressive 23.0 percent. The growth is mainly owing to lesser working days in November because of Eid holidays. Exports too grew marginally by 5 percent MoM due to the low base of last month. Cumulatively, in 1HFY12 total cement off take was up by 4.2 percent YoY to 15.4 million tonnes after floods had stalled sales in the corresponding period last year.

Encouragingly, despite lack of funds for development expenditures amid government’s tight fiscal situation, local cement sales have grown by 13.1 percent YoY to 2.02 million tonnes in December 2011. On the other hand, local sales on a MoM basis are up by a massive 23.0 percent after fewer working days (due to Eid holidays) had stalled sales in November. 

In 1HFY12 domestic sales grew steadily by 8.3 percent YoY to 10.94 million tonnes owing to a lower base as floods had suppressed sales last year. Moreover, high remittances and suburban housing projects in the country have kept the domestic demand afloat. However, the biggest bright spot for the industry remains the soaring prices, which have increased by an average 38-39 percent YoY in 1HFY12. 

Despite the slow recovery in local dispatches, export demand remained on the sidelines due to lower development activities amid capacity extension in some Middle Eastern countries. Local dispatches in the north region (having 84 percent share of the total country’s capacity) contributed to 79 percent to the total industry dispatches. 

This included 8.9 million tonnes (up 8.27 percent) local and 3.3 million tonnes (down 4.6 percent) export dispatches. On the other hand, local and export dispatches in southern part of the country stood at 1.9 million tonnes and 1.2 million tonnes during the 1HFY12. Total export dispatches during the same period stood at 4.45 million tonnes, where demand from Afghanistan and India continues riding northwards, while export to other routes remained sluggish. Exports to Afghanistan and India showed a healthy growth of 10.35 percent YoY and 62.64 percent YoY (due to renewal of BIS license) to stand at 2.5 million tonnes and 0.350 million tonnes respectively. 

Conversely, exports to other routes posted a significant decline of 22.7 percent YoY to stand at 1.6 million tonnes.

It is expected cement profitability to be more dependent on prices as compared to dispatches, if the dispatches clock in at (32.5m tonnes in FY12 as expected) and prices remain firm, profitability of the sector’s big giants (LUCK and DGKC) is expected to generate further investor’s interest in these companies’ scrips. 

However, cement dispatches are expected to improve from February onwards due to better PSDP utilisation as the election year dawns, thus the government is expected to enhance its public spending in the 2HFY12.