On the back of upbeat local demand and bright export prospects, the cement sector is expected to have another windfall year in sales as well as in exports.
Analysts and industrialists of the cement sector say the last quarter of fiscal year has always proved a boon for the industry because of an increase in construction and development activities across the country with the onset of the summer season.
Due to strong expectations of high consumption in the days to come, the estimates for the whole-year sales are being revised upwards.
Based on the cement dispatches in the first nine months of the current financial year, the full-year cement sales is being forecast at 24-24.5Mt against earlier estimates of 23.5Mt of sales in the whole year.
The local demand for cement is expected to remain upbeat as usually in the fourth quarter (April-June) of fiscal year demand peaks with the start of summer season, which also brings major infrastructure and construction activities in the country, analyst Atif Malik at Jahangir Siddiqui Capital Markets believes.
The government is likely to try to utilise the maximum of record development budget in the remaining months of the current financial year and would initiate and complete a number of development projects, which would be consuming more cement.
On the export side, the shortage of cement in the region also bodes well for Pakistani cement manufacturers, which would not only result in export of a major quantity, but would also bring in high export price. The country exported 1.305Mt of cement in the first eight months of the current financial year, showing a 16 per cent growth compared with the corresponding period of the previous year.
“Cement export will pick up in next few moths with the high export price, and the consumption of cement in the country is also set to register a rise in the coming days”, Abdul Razzaq Thaplawala said.
He also expressed optimism that Pakistani cement would also find its way into neighbouring India, which has abolished countervailing duty and additional customs duty on cement imports in a bid to curb local cement prices in the country. “This bodes well for Pakistani cement manufacturers as with removal of these duties, the Pakistani cement would become competitive in the huge Indian market,” analysts noted.
They calculate that the landed cost of Pakistani cement in India would come to around $93-107 tons at retail, which would be competitive compared with Indian cement at $109 dollar per ton in the northern parts of India and $95 dollar per ton in southern parts.
Investor confidence in the booming cement sector was also reflected in Monday’s trading at the Karachi Stock Exchange (KSE), where cement scrips dominated trading with huge trading volumes.
The three top volume leaders in the stock trading on Monday were from the cement sector with total four cement sector companies in the top 10 volume leaders in the session.
Analysts also recommend buying shares of major cement companies listed at the stock market because of burgeoning sales and high earnings in coming months, which is likely to attract investors.