AIRLINK 68.20 Increased By ▲ 3.61 (5.59%)
BOP 5.75 Increased By ▲ 0.15 (2.68%)
CNERGY 4.70 Decreased By ▼ -0.02 (-0.42%)
DFML 22.32 Increased By ▲ 1.56 (7.51%)
DGKC 71.52 Increased By ▲ 0.12 (0.17%)
FCCL 20.10 Increased By ▲ 0.15 (0.75%)
FFBL 30.74 Increased By ▲ 0.29 (0.95%)
FFL 10.05 No Change ▼ 0.00 (0%)
GGL 10.05 No Change ▼ 0.00 (0%)
HBL 116.00 Increased By ▲ 5.00 (4.5%)
HUBC 131.51 Increased By ▲ 0.67 (0.51%)
HUMNL 6.77 Decreased By ▼ -0.08 (-1.17%)
KEL 4.44 Increased By ▲ 0.05 (1.14%)
KOSM 4.63 Increased By ▲ 0.29 (6.68%)
MLCF 37.60 Decreased By ▼ -0.15 (-0.4%)
OGDC 135.39 Increased By ▲ 1.54 (1.15%)
PAEL 22.95 Increased By ▲ 0.38 (1.68%)
PIAA 27.05 Decreased By ▼ -0.50 (-1.81%)
PIBTL 6.23 Decreased By ▼ -0.08 (-1.27%)
PPL 116.00 Increased By ▲ 1.05 (0.91%)
PRL 27.45 Increased By ▲ 0.23 (0.84%)
PTC 16.51 Increased By ▲ 0.01 (0.06%)
SEARL 60.40 Decreased By ▼ -0.30 (-0.49%)
SNGP 67.25 Increased By ▲ 2.10 (3.22%)
SSGC 11.21 Decreased By ▼ -0.14 (-1.23%)
TELE 9.05 Increased By ▲ 0.08 (0.89%)
TPLP 11.54 Increased By ▲ 0.29 (2.58%)
TRG 71.40 Increased By ▲ 2.35 (3.4%)
UNITY 23.51 Increased By ▲ 0.07 (0.3%)
WTL 1.41 Increased By ▲ 0.02 (1.44%)
BR100 7,366 Increased By 41.8 (0.57%)
BR30 24,423 Increased By 365.3 (1.52%)
KSE100 70,914 Increased By 369.4 (0.52%)
KSE30 23,330 Increased By 139.4 (0.6%)

Last week, our analysis of the financial statements of 15 cement companies showed that the first half of the fiscal year went impressively well for the industry as a whole, considering how badly the economy has been faring. In 1HFY24, cement companies saw combined revenues increase by 20 percent, eventually leading to a 24 percent uptick in post-tax earnings (with a tax incidence of 35% on average), and a small increase in margins compared to 1HFY23. This came on the back of dispatches going up by 10 percent, bolstered predominantly by exports that more than doubled (2.1x). Local dispatches though remained weak, up on 1 percent in 1HFY24.

What has happened since December though is domestic demand becoming even weaker than in the first half and exports growing by less than former months. In 8MFY24 for instance, total dispatches are up 2.5 percent cumulatively, of which exports grew 73 percent and domestic sales actually declining by 3 percent. At the same time, in the past four consecutive weeks, cement prices have been slowly tracing their steps back. Even more concerning is that there is a distinct volatility in prices since July.

On the one hand, the industry has on its hand a domestic demand that is not ready to bounce back, and on the other is the jerkiness in domestic prices. For context, let’s compare the monthly average sales in the domestic market for the industry between Fy17 and Fy24 for the period 8M. Data suggests, Fy24’s monthly average thus far is lower than every year except Fy17 and Fy19, which would be even more unsettling if we consider the capacity growths that have happened over the past five years. Despite impressive growth in exports, total capacity utilization for the industry is trailing lower than 60 percent. At this rate, even if exports maintain 15 percent of the total sales mix—which they are at the moment—the industry will be set back at least six years in terms of total offtake. Prices are up by a multiple of 2-2.5x since that time, which means the industry may still keep making money, but by no means, is this positive news.

Specially, if prices slowly keep coming down and/or there is no reprieve in energy and transport costs. Though the industry has spent hefty sums on energy efficiency projects and tooled their plants to use a mix of coals from multiple sources, rising costs remain a concern, specially if there is a price competition among cement players. Having said that, if the past year has been any guide, predicting price wars may seem like fear mongering at this point as companies continued to maintain a tacit understanding on prices in various markets such that despite reduction in dispatches and decline in capacity utilization, prices never came down a certain level. It seemed more beneficial to keep prices looking forward and up. What remains to be seen is the inflection point where companies begin to retract from the group and think about fending for themselves. Thus far, that point was never reached, but it may soon if individual capacity utilization drops below 50 percent despite companies making efforts to sell their product overseas.


200 characters
Az_Iz Apr 02, 2024 07:16pm
Facing hurdles,of capacity expansion while energy prices went up, and demand dropped,and still managing to stay profitable on their own without crying for subsidies is pretty good.APTMA should learn.
thumb_up Recommended (0) reply Reply
Az_Iz Apr 02, 2024 07:19pm
Capacity expands,domestic demand drops. Make up for it,at least partly,through exports in a competitive global market,without crying for subsidies.Very impressive.
thumb_up Recommended (0) reply Reply
Az_Iz Apr 02, 2024 07:30pm
Bussiness that tackle the headwinds on their own,is what the country need.End all ridiculous subsidies. Bussiness that need crutches will not win a race.
thumb_up Recommended (0) reply Reply