Cement sales during the last fiscal year showed a growth of 12.6 per cent, reaching at 18.4Mt - 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 per cent, cement dispatches in FY2006 depicted growth of 12.6 per cent. Total cement sales in FY2006 stood at 18.4Mt as against 16.4Mt sold last year.
As per latest cement dispatches data, local sales stood at 16.9Mt compared to 14.8Mt last year, portraying an increase of 14 per cent, whereas, exports at 1.5Mt, down by 3.8 per cent. 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.
Industry capacity utilisation during FY2006 stood at 88 per cent. 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 20.9Mt compared to 17.9Mt at the end of FY2005. According to figures available, Lucky Cement dispatches stood at 2.2Mt; D.G. Khan Cement (2.13Mt); Maple Leaf Cement (1.47Mt); Bestway Cement (1.29Mt); and Fauji Cement (1.07Mt).
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 per cent.
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 per cent to 20.6-21.0Mt, whereas, beyond that we expect them to grow by 10 per cent 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.