Pakistan capacity utilisation hits decade low

Capacity utilisation of the Pakistan cement sector reached its lowest level for a decade (at 69.67 per cent) in the first two quarters of 2011-12 which ended on 31 December 2011. Meanwhile, exports continued to decline, offsetting the gains in local consumption.

"The expected turnaround in the economy did not materialise as the capacities of the sector continued increasing," said a spokesman of the All Pakistan Cement Manufacturers' Association (APCMA). He said that expansions in cement sector were planned six years back when the economy was moving. The prolonged recession of recent years and drying of government development programs have played havoc with the viability of the cement sector.

He said that the domestic demand in December was encouraging, showing a growth of over 13 percent. This compensated to some extent the decline of 5.12 percent in local demand in November. He said that exports, however, remained under pressure during the last six months posting decline in four of the last six months. The exports declined by over eight per cent in December. The overall decline in exports stood at 4.58 percent during July-December 2011 period.

Cement units located in South registered a healthy growth of 19.2 per cent in the local market but posted even higher 20.02 per cent decline in exports in the first six months of this fiscal. The majority of the cement capacity, however, is located in the Northern part of the country where the industry posted a modest gain of six per cent in domestic market and even lower increase of 2.51 percent in exports.

The total cement despatches in the first two quarter of this year was 15.40Mt which was 4.21 percent higher than the cement despatches of 14.78Mt during corresponding period last year.

During the 1st quarter of current fiscal year, seven cement units suffered pretax losses averaging PKR0.973bn while eight cement units, of which three are located near Karachi in close proximity to the seaport, earned profit of PKR1.001bn. At the end of last fiscal, industry debts to financial institution amounted to over PKR125.3bn while equity was PKR114bn.

Spokesman for All Pakistan Cement Manufacturers Association (APCMA) also pointed out that most of its member companies had been incurring huge losses after substantial surge in the cost of production. The input prices, especially coal, furnace oil, diesel, electricity have witnessed significant increase from last few months which have jacked up phenomenally, cement producers' cost of production.