Cement sector profitability is expected to grow by 11 per cent in fiscal year 2008-09 with record Public Sector Development Programme (PSDP) of PKR541bn for fiscal year 2008-09, up four per cent from current year’s PKR520bn, and rising exports, the JS Research report says.
The research house expects cement sales to increase by 25 per cent to 30-30.5Mt. Going forward FY09, sales would increase by 10 per cent to reach 33.0-33.1Mt. The construction growth will continue to surpass targets of FY08 and FY09, JS said.
Shortage of cement in India, Afghanistan, South Africa, Sri Lanka and Middle East will keep the export market strong. The cement sector saw massive export sales growth in 2007-08. However, profitability of the cement sector fell 69 per cent in nine-months Jul-Mar FY08. Price war caused revenues to decline, negatively impacting net profits, JS said.
Similar to the Budget FY 07-08, it is expected that government would announce a number of infrastructure development projects like extending of existing dams and building of new ones.
NEC has already allocated PKR166bn for the infrastructure sector and PKR10bn has been allocated for the national program to develop 314 small dams across the country. The programme is estimated to take over four years to complete and its total cost to stand around PKR54bn.
A slight cut in allocation of funds for infrastructure development programmes will not hamper cement sales since demand is mainly generated by private sector projects and exports. On the other hand, further fund allocation for much needed dams can boost cement sales in the long run, JS said.