Published On: Mon, Nov 2nd, 2015

Pakistan’s cement industry enjoys 33 percent growth in profits


KARACHI: Pakistan’s cement industry enjoyed a healthy growth of 33 percent in its profitability to Rs12 billion in the first quarter of the current 2015/16 fiscal year on the back of a surge in local demand and as a fall in international crude prices brought down the cost of energy, said an analyst at a brokerage house on Monday.

“Growth in profits was owing to a rise in local sales, improvement in gross margin and lower distribution expenses,” said analyst Nabeel Khursheed at Topline Securities, calculating profits of 14 cement manufacturers listed on the Karachi Stock Exchange, out of 19.

The country’s cement industry sold 8.273 million tonnes in the July-September period, up a little 1.43 percent over the same period of the last fiscal year ended June 30, 2015.

Local cement sales surged almost 11 percent to 6.76 million tonnes in three months as the industry cheered a rise in construction activities across the country.

China has pledged US$46 billion investment for the China-Pakistan economic corridor project that is expected to boost local cement consumption. The corridor will include a number of motorways, flyovers and power generation projects.

Private and public sectors are engaged in building of houses and apartments, small dams and flyovers.

Many leading cement manufacturers, including Cherat Cement, DG Khan Cement, Attock Cement and Lucky Cement have already announced expansion in their production capacity.

“With a cumulative capacity expansion of 6.9 million tonnes, the total industrial production capacity will climb to 51.5 million tonnes/year,” Khursheed said.

The analyst said the expansion is needed and without it demand and supply in the local market will reach an intersection point within the next two years.

The global crude oil prices dropped 50 percent since last June, giving Pakistan, whose oil import bills account for one-fourth of its annual $45 billion imports, an opportunity to save its foreign reserves.

Pakistan’s cement exports dipped 27 percent to 1.4 million tonnes in the first three months of the current fiscal year as there was a subdued demand in the neighbouring Afghanistan.

Iran’s cement has trimmed Pakistan’s share in the international market. However, Pakistan’s cement is still a preferable commodity for UAE, India, Qatar and Sri Lanka because of its quality.

“We think that exports may drop 28 percent to 5.2 million tonnes in the whole fiscal year,” Khursheed said.

“We, however, remain bullish on local sales, which are expected to post a stellar growth of 11.4 percent to 31.5 million tonnes.”

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