Industry sales in Pakistan grow by 4% in 1HFY18

Industry sales in Pakistan grow by 4% in 1HFY18
05 March 2018

The profitability of the cement sector in Pakistan has contracted in the 1HFY18, falling 13 per cent YoY to PKR26.85bn (US$258.4m). This has been attributed to both an increase in the international coal prices and a lower cement retention cost.

In the 1HFY18, industry sales grew by four per cent YoY to PKR134.03bn, while cement dispatches recorded a growth of 12 per cent to 19.6Mt. However, this did not result in the topline growth of the sector due to a lower retention price in the northern region, which has decreased five per cent/bag from June 2017. Moreover, industry gross margins declined from 41 to 32 per cent, as international coal prices increased by nine per cent to US$95/t during the first half of the financial year.

Elsewhere, DG Khan Cement’s planned 3Mta expansion is expected to go online in the 4QFY18. In the northern region of the country, anticipated capacities are expected to be delayed due to environmental issues.
A local research house expects cement consumption growth to continue as the winter season concludes and more people are expected to become active in the construction sector. Furthermore, in this election year, the government is likely to increase spending on construction activities to incite the interest of voters. However, it has only spent 42 per cent of the country's PKR1001bn Public Sector Development Programme during the 8MFY18.

In February 2018 cement bag prices advanced by PKR10/bag to PKR515/bag in the northern region and this is anticipated to grow further due to robust cement demand, which will translate into industry profitability going forward.

Published under Cement News