Public sector development plans: reduced spending playing havoc with cement sector

The capacity utilisation of cement sector reached 69.67 percent, the lowest in past one decade, in the first two quarters of 2011-12 that ended on December 31, 2011, while exports continued to decline offsetting the gains in local consumption. The cement industry ended the year 2011 not on a very encouraging note.
The capacity utilisation of the industry stood at 81.53 percent in 2007-08 that has gradually declined to its present level, giving nightmares to the cement manufacturers. "The expected turnaround in the economy could not be materialised as the capacities of the sector continued increasing," said a spokesman of All Pakistan Cement Manufacturers' Association (APCMA) here on Friday.
He said that expansions in cement sector were planned six years ago when the economy was moving. The prolonged recession of recent years and drying of government development programmes have played havoc with the viability of the cement sector.
He said that the domestic demand in December was encouraging, showing a growth of over 13 percent. This compensated to some extent the decline of 5.12 percent in local demand in November. He said that exports, however, remained under pressure during the last six months posting decline in four of the last six months. The exports declined by over 8 percent in December. The overall decline in exports stood at 4.58 percent during July-December 2011 period.
Cement units located in South registered a healthy growth of 19.2 percent in the local market but posted even higher 20.02 percent decline in exports in the first six months of this fiscal year. The majority of the cement capacity, however, is located in the northern part of the country where the industry posted a modest gain of 6 percent in domestic market and even lower increase of 2.51 percent in exports. The total cement despatches in the first two quarters of this year was 15.40 million tons which was 4.21 percent higher than the cement despatches of 14.78 million tons during corresponding period of the last year.
During the 1st quarter of current fiscal year, 7 cement units suffered loss before taxation aggregating to Rs 0.973 billion while 8 cement units, of which 3 are located near Karachi in close proximity to the sea port, earned profit of Rs 1.001 billion. At the end of last fiscal year, industry debts to financial institution amounted to a staggering over Rs 125.3 billion while equity was Rs 114 billion. Spokesman for All Pakistan Cement Manufacturers Association (APCMA) also pointed out that most of its member companies have been incurring huge losses after substantial surge in the cost of production.