Cement sector posts 33 percent negative return in 2011 YTD

With no up tick in cement dispatches and slowdown in infrastructure spending, investors remained distant from Pakistan cement sector, which posted negative return of 33 percent in 2011 year-to-date (YTD), analysts said. Moreover, global debt crisis also kept local investors at bay due to uncertainty in the commodity markets, they added.
Furqan Punjani, an analyst at Topline Securities, said that out of 19 listed cement companies, only 2 companies ie Kohat Cement (KOHC) and Lucky posted positive returns of 22 percent and nine percent, respectively. "For a better comparison we have excluded Javedan Corporation (JVDC) as it has relinquished its cement operations," he said. The worst performing stocks in the sector were Al-Abbas Cement (AACIL) followed by Bestway (BWCL).
Turnaround in profitability amid higher sales in local arena, Kohat Cement stood as the best performer in the cement sector universe. The scrip posted a double digit positive return of 22 percent in 2011 YTD outperforming the benchmark KSE 100 by 28 percent.
Similarly, Lucky, with 9 percent return stood as the second best performing stock in cement, thus outperforming KSE-100 index by 15 percent. The cost efficient plant not only benefited from rising local cement prices (highest share in local market) but also remain stable in export markets despite weak global demand.
"Javedan Corporation also posted a positive return of 8 percent during the said period but since the company has abandoned its cement operations we have not included it in our sector return calculation," he said. He said apart from heavy weight Lucky Cement and turnaround story in Kohat Cement, entire cement sector posted negative returns. Al-Abbas Cement with negative 73 percent return stood as the worst performer. Besides technical difficulties in plant, non materialisation of acquisition deal by Attock Cement remained the other major reason behind its huge underperformance.
Bestway cement posted negative return of 68 percent over its persistent under utilisation while FCCL posted negative return of 63 percent amid delay in commercial production of its new 2 million ton plant. Moreover, with depressed market sentiments, DG Khan with huge investment portfolio posted negative return of 38 percent.