FY12 closes with glorious local dispatches

The curtain closed on cement dispatches for FY12 with robust growth seen in June. With over three million tons of cement dispatched in June alone, the month recorded the second highest monthly dispatches this fiscal year, second only to March. The entire fiscal year clocked in with a three percent growth in total, including both local and export sales, according to data released by the All Pakistan Cement Manufacturers Association (APCMA). As would be known to followers of these columns and the cement industry in general, much of the growth in dispatches comes at the heels of increasing local sales, since FY12 had been a tough year as far as export sales were concerned. The improved local dispatches are attributable to improved housing construction, as well as post-flood reconstruction activities, especially in the southern region following the floods in Sindh last year. In addition, PSDP expenditures during FY12 were more efficiently utilised relative to the previous years at Rs734 billion compared to the budgeted Rs730 billion. The export side continued to leave a lot to be desired, with nine months in the entire fiscal year showing a year-on-year decline. Overall, exports fell by nine percent during FY12, with much of the decline witnessed in the southern region in exports via sea. This decline could be explained by the general excess capacity in the GCC region, as well as lower prices in international markets that rendered exporting cement unfeasible in terms of margins. At the same time, the slowing of global growth may also explain the shrinking of demand from overseas countries. Demand from African markets has stayed firm, however. Afghanistan and India offered some respite, with regards to export sales, with Afghanistan showing a nearly flat increase, while those to India increasing by about three percent on a year-on-year basis during FY12. Going forward, FY13 continues to keep the sectors prospects bright. On the domestic side, further volumetric growth in cement sales is expected, thanks to a budgeted 19 percent increase in PSDP expenditures during the year relative to what was expended during FY12. Needless to remind, the coming year will also be an election year; so, the probability of PSDP expenditure realisation reaching cent percent is also quite high. On the export front too, industry players believe export dispatches to have bottomed out, and expect them to improve a tad bit if not a lot relative to what was seen in FY12. Besides, a weakening rupee against the dollar also means that many exporting companies will also find it more feasible to sell their product abroad in terms of margins. Thus the cement industry appears poised to embrace FY13 with a lot of positives.