Time never stays the same; the adage makes an immense relevance to the cement sector of Pakistan. There was a time in 2011 when over 80 percent of the cement manufacturers suffered enormous losses on the back of stagnant local consumption, high cost of production and declining exports, amid no government support extended to the ailing industry. Compare it with its circumstances today - the industry fortunes have moved upside down.
In the wake of PSDP spending spree, reduced coal prices and low interest rate backdrop, the cement sector is becoming investors darling with each passing day. Whats more? February sales added another favour to the industry fate.
During the month, the sector boasted a five percent rise in its overall sales to tally 2.62 million tons and to our absolute surprise, this time around, local sales was not the growth propeller for the sector. Instead, the growth is mainly driven by export sales, which surged by 15 percent YoY while local sales inched up by a scanty two percent YoY.
The growth in export sales came on the heels of exports via sea routes which rebounded by 32 percent in February. Afghanistan market also remained favourable for the sector where export dispatches increased by seven percent in February to tally 0.28 million tons. Contrastingly, exports to India dropped by 29 percent to 31,781 tons in February FY13 due to unabated NTBs imposed by the Indian Government.
Afghanistan so far, has proved to be a lucrative market for Pakistani cement but with the gradual departure of western forces from the region, the prospects of growth and development have diminished.
Comparing the 8MFY13 with the corresponding period of the last year, the local sales grew by seven percent YoY to tally 15.8 million tons, while exports clocked in at 5.4 million tons signifying a drop of 3.88 percent YoY.
Region-wise performance reveals that the northern part of the country where majority of cement units are located, posted a YoY growth of 7.28 percent in local sales while the export sales dropped by a meagre 0.85 percent in 8MFY13.
The southern region remained inferior during the period. Albeit the local sales rebounded remarkably by 6.22 percent YoY during 8MFY13, nevertheless the radical decline in exports by 11.72 percent diluted the superior local sales performance compelling the region to post an overall negative growth.
The cement sector doesn need to be disgruntled by the flat sales in February as the local activity is expected to pick up pace from March. Local sales will rebound on the back of enhanced construction activity as we move closer to elections. Moreover, post-election development drives are also expected to lend much needed thrust to the sector.