LAHORE - Pakistan cement sector has been on a rising trend and this is not limited to just escalation in retention prices, but local demand is gradually picking up as well in spite of economic slowdown, experts said.
According to statistics, sector’s capacity utilisation in 1HFY13 stood at 71 per cent against 69 per cent in the same period last year, up 2pps. Furthermore, after a jittery start to 2HFY13, dispatches were seen to improve in February, 2013.
Asad I. Siddiqui, an expert, viewed that cement sector’s capacity utilisation would clock in at 79 per cent for 2HFY13 translating into FY13 production of 33.6 million tons against 32.5 million tons in last year, up 3 per cent. However, another expert Furqan Ayyub observed that the cement sector clocked in a staggering 154 per cent YoY earnings growth in 1HFY13. On a QoQ basis too, the sector posted healthy bottom-line growth of 34 per cent QoQ in 2QFY13.
Not surprisingly, earnings growth was driven by margin expansion, where sector gross and EBITDA margins, both ticked up by 9ppts in 1HFY13 to 37pc and 36pc respectively.
In February, 2013 sector’s dispatches stood at 2.6 million tons versus 2.7 million tons in the prior month. However, per day dispatches stood at 93k tons against 86k tons in January, 2013. Thus it is safe to say that dispatches started to pick up in February, 2013, as on per day basis they were up 9 per cent.
After analysing past 12 years figures, experts observed that cement sector’s capacity utilisation has improved by 8pps in 2H in against 1H. With 16 million ton dispatch in 1HFY13, we estimate 2HFY13 dispatches to be up by 11 per cent to the level of 17.6 million tons, out of which 5.3 million tons have been realised so far in the first two months of 2HFY13. Consequently, in the remaining 4 month we estimate cement dispatches to average at 3.1 million tons.
Domestic demand coming in from housing sector will be the prime propellant of overall growth in sector’s dispatches in 2HFY13, we believe. As per our estimate local sales are likely to be around 13 million tons against 11.7 million tons in 1HFY13, up 11 per cent. This incremental demand is likely to push local capacity utilization by 10pps to 58 per cent in 2HFY13, taking local dispatches to 24.7 million tons for FY13, up 3 per cent as against FY12.