The cement sales growth during January 2005 slows down to 7.6 percent because of winter rains, slowing down construction activity and holidays on account of Eid-ul Azha. The figures released by the All Pakistan Cement Manufacturers Association (APCMA) indicates that cement demand growth during January 2005 has slowed down to 7.6 percent as against the over 20 percent growth witnessed during most of the first six months of 2004-05.
According to industry sources, this slowdown is seasonal and mainly attributable to the Eid holidays during the month, which generally leads to a decline in construction activities. Industry cement sales during January stood at 1.23 million tons where the break up was local sales and exports amounting to 1.17 million tons and approximately 53,000 tons respectively.
Exports to Afghanistan have also decelerated markedly on shipment delays and closure of routes on the back of the winter season. Overall demand growth during July - January 2005 is up to 21.5 percent to 9.04 million tons as against 7.43 million tons during the corresponding period of last year.
Tanvir Abid, head of research at Live Securities said that the cement demand in the North and South cement zones depicts a diverse trend. During January, sales in the North zone were up 13 percent to 0.974 million tons. On the other hand, sales in the South zone at 0.249 million tons depicted an 8.5 percent dip. Taking a look at the year-to-date figures (since July 2004), local cement dispatches have soared 19 percent to 8.2 million tons and exports are 53 percent higher to 0.83 million tons.
Industry capacity utilisation during FY05 has stood at 86.5 percent, considerably higher as compared to nearly 75 percent last year. Among the leaders, the utilisation levels of D G Khan Cement, Bestway Cement and Lucky Cement surpassed the cent percent levels to respectively 103 percent, 109 percent and 103 percent.
The capacity utilisation of Fauji Cement and Attock Cement was at 94 percent and 88 percent respectively. Maple Leaf Cement's plant utilisation remained at the lower side at 86 percent.
"Our outlook on the cement industry is positive on the back of favourable demand prospects and gradual capacity additions by manufacturers," Tanvir said. President Musharraf during the last few weeks had repeatedly mentioned the need for construction of new dams and water reservoirs and for building national consensus towards it.
These prospects bode extremely favourably for domestic demand. Going forward, industry gross margins are also to improve on the dual impact of declining international coal prices and slight increase in cement prices.
At the same time, exports to Afghanistan will continue to multiply with United Arab Emirates (UAE) also emerging as an important outlet for the country's cement.
Following the slowdown during January, we anticipate demand to sharply rebound during the remaining months of FY05 with full year industry sales growth expected around 24 percent. The cement sector financial results for the half-year ended December 2004 are also to portray a sanguine picture. We shall be coming out with our earnings expectations in the coming days. Lucky Cement, D G Khan Cement and Pioneer Cement are our favourite scrips of the sector, he concluded.
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