The profitability growth of most of the listed cement sector companies is expected to continue in the fiscal year 2006 and fiscal year 2007 due to increasing demand, analysts say.
“Profitability will show decent growth for the next two years,” said Atif Malik, a cement sector analyst at Jahangir Siddiqui Capital Markets. According to him, the cement sector, contrary to general expectations, is expected to post a decent growth in profitability of 22 per cent and 10 per cent during the next two years. The main reason behind this growth is upbeat cement demand, which is expected to remain strong on the back of government’s enhanced focus on infrastructure development.
“By looking at the profitability of individual cement companies, we can see that during the next 2 years, companies which would have completed their expansions, such as Lucky and Pioneer, would capitalize on their increased quota allocation thereby increasing their profitability,” he said.
Most leading cement companies listed at stock exchanges have posted tremendous growth in profitability in the last two fiscal years and for the current fiscal year 2005 this growth trend is expected to continue since the sector is expected to post 44 per cent growth in profitability.
Cement prices are expected to increase at an average of three per cent annually for the next two years. However, prices are likely to decline in the fiscal year 2008 under the assumption that the cartel would break following all capacities coming online. Moreover, no growth is assumed in exports from the fiscal year 2008 onwards.