In 1HFY15, total cement dispatches clocked in at 17.12 million tons, a rise of 6 percent when compared to the same period last year. The growth came on the back of strong domestic demand which saw an up tick of 9 percent year-on-year to stand at a level of 13 million tons during the period. According to sector analysts, this growth is despite political sit-ins and natural calamities milling around the country. Here, considering lower levels of PSDP utilization, brownie points are to be given to the private sector for spiriting on construction activities, hence leading to an up tick in domestic demand for cements.
Exports on the other hand, followed downward trajectory declining by 2 percent year-on-year to 4.05 million tons. Moreover, dispatches of northern region rose by 6 percent while southern region savoured a growth of 7 percent when compared to 1HFY14.
It is interesting to note that the burden of fall in aggregate exports in 1HFY15 is to be blamed to the exports of northern region. Exports of north fell to 2.5 million tons, depicting a decline of 9.65 percent over the comparable period last year. However, in December alone, northern exports plunged by 18.5 percent, which is the second-highest fall after July 2014 in the fiscal year. Here, subdued export demand from Afghanistan continues to be the culprit of pushing export numbers to fresh lows.
Aggregate dispatches during December 2014 touched a level of 3.11 million tons, reflecting a rise of 5.7 percent year-on-year led by vibrancy in local cement demand. According to Umair Vayani at JS Global, this is the highest December sale number by the cement industry.
The rosiness is proving to be profound for the sector. Strengthened margins have become an added feast for cement players of late. Improvement in margins is the outcome of falling international coal prices. Moreover, with the gradual de-leveraging of balance sheets, sliding financial charges have been offering an added boost to sector’s profitability.
Referring to Ahsan Ali, a sector analyst at Taurus Securities, a hike in gas tariff could end up being a critical blot on the landscape of cement players and with a rise in gas tariff on the cards, profitability of companies operating on captive power plants is likely to face a hit, in his view.
Yet, investors’ chemistry with cement stocks on local bourse has started budding lately with each passing day. Mind you, the sector emerged as a chart-buster on local bourse in CY14; with BR Cement Index rising by nearly 54 percent, thus putting to shame a return of 25 percent posted by KSE100 index. Needless, to say with every rise comes a fall. Let’s see for how long the investors’ love for cements overrules!
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