FY13 commenced with a robust note for the cement sector. Cement dispatches touted a YoY growth of 3.87 percent in 1HFY13 to tally 15.95 million tons as against 15.35 million tons in 1HFY12, as illustrated by the recent data released by APCMA.
Given the fact that the over 43 percent of the PSDP budget has been disbursed in 1HFY13, the local sales performance remained vigorous, posting a YoY growth of 7.61 percent. Besides, the local sales volume of 2.24 million tons realised in December is the highest ever monthly sales figure achieved by the sector so far.
On the contrary, exports kept irking the sector with its abysmal performance. Exports dispatches clocked in at 4.2 million tons in 1HFY13, posting a YoY slump of 5.28 percent. India is a lucrative export market for the cement sector yielding high demand for Pakistani cement on account of price competitiveness; however the strict NTBs imposed by the Indian government ebbs away the sectors exports to this market.
During 1HFY13, exports to India declined drastically to 0.208 million tons, from 0.35 million tons in the similar period last year.
Afghanistan market remained stable during the period where the sector exported 2.4 million tons. Likewise, exports via sea also remained steady clocking in 1.602 million tons in 1HFY13 as against 1.607 million tons in 1HFY12.
Region-wise performance reveals that the northern part of the country where majority of cement units are located, posted a YoY growth of 7.52 percent in local sales while the export sales dropped by a meager 1.31 percent in 1HFY13.
The performance of southern region remained inferior during the period. Albeit the local sales rebounded remarkably by 7.98 percent YoY during 6MFY13, nevertheless the radical decline in exports by 16.34 percent diluted the superior local sales performance compelling the region to post an overall negative growth.
Besides staggering local sales performance mainly coming on the heels on PSDP spending spree, a 25 percent rise in retention prices coupled with over 23 percent slump in coal prices in last one year have proved to be a boon for the sector by considerably improving its operating environment.
These factors together with a sharp decline of 450 bps in the policy rate in last 18 months have kept the fortunes of the sector high enabling cement stocks to outperform the KSE-100 by posting an incredible return of 156 percent in CY12.
Going ahead, while exports will continue to be a stumbling block holding up the sectors performance, superior PSDP allocation and economic recovery will prop up the local demand with an expectation of sectors profitability to grow by 36 percent in FY13.
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