Cement dispatches remain flat in 1HFY14

According to All Pakistan Cement Manufacturers (APCMA), Cement sales during 1HFY14 increased by meager 1%YoY to 16.1mn tons as compared to 15.95mn tons in the previous year. Despite of dwindling export scenario, growth was primarily led by 2.1%YoY rise in domestic dispatches. In this regards, local dispatches surged to 11.98mn tons against 11.73mn tons a year earlier, whereas disappointing demand from Afghanistan & India has decreased cement exports by 1.9%YoY to 4.14mn tons in 1HFY14.

According to Research Analyst, Kumail local sales grew by 9%MoM during Dec-13 to 2.32mn tons against 2.13mn tons, while, exports upsurge by 4%MoM to 0.63mn tons against 0.60mn tons in Nov-13. As construction activities start picking pace during the 2H, we foresee superior demand outlook in the upcoming period to supercharge companies’ profitability in FY14.

Record high local dispatches in 1HFY14

The total domestic dispatches in 1HFY14 hit 11.98mn tons witnessing 2.2%YoY growth as compared to 11.73mn tons in same period of previous fiscal year. Similarly, local dispatches in the month of Dec-13 surged by 9%MoM to 2.32mn tons against 2.13mn tons recorded in Dec-12. This was primarily on the back of increase in construction activities amid higher PSDP spending by government.

Exports remained depressed

In 1HFY14, local cement producers exported 4.14mn tons depicting a downfall of 1.8%YoY against 4.2mn tons in the corresponding period last year. On MoM basis, manufacturers exported 0.63mn tons (up by 4%MoM) of cement against 0.60mn tons in preceding month. Due to the low cement demand and competition with Iranian cement, the exports to Afghanistan has declined enormously by 14% to 2.07mn tons in 1HFY14 against 2.41mn tons a year earlier. The share of Afghanistan in total exports has also been reduced to 50% in 1HFY14 which was 57% in 1HFY13. This share was mainly taken by African countries along with Srilanka, as exports to countries (ex Afghanistan & India) grew immensely by 17.5%YoY to 1.88mn tons in 1HFY14. However 1HFY14, only 0.20mn tons of Pakistani cements found their way into India, representing a decline of 3%YoY.

Outlook: Prices may increase further!

 Recently, cement manufacturers in southern region has increased cement prices by PKR10-20 to overcome cost of electricity & gas tariff, which was increased in the month of Aug-13. According to the latest figures reported by PBS, the average price per 50kg bag in southern region is hovering at ~PKR508 whereas same bag may cost ~PKR510 in North. Against the historical price differential between north and south (PKR16/bag in last 3-yrs), narrowing price gap between the regions was owing to higher cement demand in south against prolong winters in North. However, prices are expected to increase further as demand is anticipated to rise after winter season .

Cement Dispatches – Company wise

Local – Industry	11.98	11.73	2.10%	2.32	2.13	8.90%
LUCK	1.87	1.77	5.7%	0.38	0.31	21%
DGKC	1.36	1.36	-0.3%	0.27	0.24	14%
MLCF	0.96	0.98	-2.0%	0.19	0.17	12%
FCCL	0.95	0.94	1.1%	0.19	0.16	14%