Cement sales during the last fiscal year showed a growth of 12.6 percent, reaching at 18.4 million tons - the highest number of dispatches made by the cement industry in its history.
As against last three fiscal years (FY2003-2005) CAGR of 18.2 percent, cement dispatches in FY2006 depicted growth of 12.6 percent. Total cement sales in FY2006 stood at 18.4 million tons as against 16.4 million tons sold last year.
As per latest cement dispatches data, local sales stood at 16.9 million tons compared to 14.8 million tons last year, portraying an increase of 14 percent, whereas, exports at 1.5 million tons, down by 3.8 percent. Negative growth in exports was mainly due to increased local demand on the back of rising construction activities in the country and the government's focus toward infrastructure development.
During FY2002, total local sales stood at 9.83 million tons; FY2003, 10.98 million tons; FY2004, 12.54 million tons; FY2004, 14.79 million tons.
Exports started climbing from fiscal year 2002 from 110,000 tons to 430,000 tons in FY2003; 1.12 million tons in FY2004; 1.57 million tons in FY2005; while in FY2006, around 1.51 million tons.
Industry capacity utilisation during FY2006 stood at 88 percent. Against this, during the last three fiscal years (FY2003-2005), utilisation stood at 70 percent, 81 percent and 91 percent, respectively.
At the end of FY2006, industry's installed capacity also improved as it stood at 20.9 million tons compared to 17.9 million tons at the end of FY2005.
According to figures available, Lucky Cement dispatches stood at 2.2 million tons; D.G. Khan Cement (2.13 million tons); Maple Leaf Cement (1.47 million tons); Bestway Cement (1.29 million); and Fauji Cement (1.07 million tons).
(Only those companies have taken which have dispatches of more than a million tons).
Atif Malik, research analyst at Jehangir Siddiqui Capital Markets Ltd, said at the end of FY2006, per capita cement consumption in Pakistan has also increased, as it now stands at 117kg per capita. Compared to this, in FY2005, per capita consumption of cement was 106kg. This depicts a growth of 11 percent.
He said going forward, we expect growth in dispatches witnessed in the last few years to continue, albeit, at a lower pace. This is due to increasing construction activity in the private sector and record PSDP allocation of Rs 435 billion by the government in the budget FY2006. The government's focus toward building mega dams in the next 5-6 years is also expected to increase consumption of cement.
For the full year FY2007, we expect dispatches to increase by 12-14 percent to 20.6-21.0 million tons, whereas, beyond that we expect them to grow by 10 percent annually for the next few years. We maintain our 'market-weight' stance for the cement sector with D.G. Khan and Lucky cement being our top picks.