Pakistan’s cement market contracts in FY2009-10

Pakistan’s cement market contracts in FY2009-10
Published: 04 October 2010

Cement production in Pakistan fell by 4.69% in July from 2.665Mt last year to 2.540Mt, according to the Federal Bureau of Statistics. In its latest release of business results, the industry revealed a series of losses. According to industry sources, low cement prices and high electricity costs squeezed profit margins and several companies went into the red.

A series of company results released indicates that Pakistan’s cement companies have booked losses during the past financial year, which ended 30 June 2010. Mushtehkam Cement reported a loss of PKR263m (US$3.09m) against a los of PKR102m the previous financial year. The company’s net turnover climbed from PKR1315m to PKR1462 over the same period. While gross loss stood at PKR70.19, down from PKR119.79 last year, increasing administrative expenses and financial cost increases were partly-responsible for greater pre-tax losses of PKR490.02m when compared with PKR251.16m. Mushtehkam Cement has a cement capacity of 1.134Mta.

Bestway Cement Ltd posted a loss of PKR1209 m against profit of PKR974m earned in the previous financial year. Net turnover fell to PKR13.333bn from PKR14.814bn but cost of sales increased to PKR11.564bn from PKR10.044bn. Pre-tax loss reached PKR1.411bn from PKR1.204bn in last FY. The company has a combined cement capacity of 7.03Mta at its Hattar and Chakwal plants.

Kohat Cement Company Ltd incurred a loss after taxation of PKR327m compared to profit after taxation of PRK27m in the previous year. Mr Aizaz Mansoor Sheikh, the company’s CEO, attributes the muted result due to lower cement prices for which sales volumes although increasing by 53%, could not counteract fully. Net sales climbed from PKR3.395bn to PKR3.692bn but cost of goods rose substantially from PKR2.591bn to PKR3.341bn. Pretax results swung from a PKR21.18m profit to a PRK382.2m loss.  Kohat operates 2.677Mta of grey cement capacity and 0.142Mta of white capacity.

Al-Abbas Cement Industries also announced a loss after taxation, PKR720m. Last year, the figure corresponded to a profit of PKR121m. Net sales fell from PKR2982m to PKR2198m with cost of sales declining marginally.

However, more recently, the market appears to be recovering slowly although export markets remain under pressure.