CEMENT DISPATCHES IN 4M/FY08

MARIAM NASIR
Manager Research

Nov 12 - 18, 2007

In comparison to latest numbers, cement dispatches in 4M/FY08 exhibit an upward growth of 33% on yearly basis. Concurrently, north and south zone sales increased by 34% and 30% respectively. Whereas local and exports breakup reflected a growth of 18% and 153%. Locally north headed over south by 23% (export: 141%) whilst, south has dominated in terms of exports with 179% (local: -5%). Periodical impact has been observed during the time as Eid and Ramadan tranquil the sales volume upturn, which have been further dampened by the upcoming winter season. The sector portrayed an over all growth in terms of numbers on y-o-y basis, on the contrary m-o-m sales volumes declined by 11%, in tandem north and south contributed 8% and 20% decline respectively.

(TONS)

JUL-07

AUG-07

SEP-07

OCT-07

4M/FY07

4M/FY08

CHANGE %

NORTH ZONE

Local

1,662,996

1,706,371

1,571,423

1,480,625

5,231,277

6,421,415

23%

Export

284,429

382,317

346,391

274585

534,418

1,287,722

141%

Total

1,947,425

2,088,688

1,917,814

1755210

5,765,695

7,709,137

34%

SOUTH ZONE

Local

284,136

256,752

262,529

181,431

1,039,467

984,848

-5%

Export

156,668

193,670

176,651

169,089

249,395 

696,078

179%

Total

440,804

450,422

439,180

350,520

1,288,862

1,680,926

30%

TOTAL (NORTH+SOUTH)

Local

1,947,132

1,963,123

1,833,952

1,662,056

6,270,744

7,406,263

18%

Export

441,097

575,987

523,042

443,674

783,813

1,983,800

153%

Grand Total

2,388,229

2,539,110

2,356,994

2,105,730

7,054,557

9,390,063

33%

MARKET SHARE

Lucky Cement availed the first mover advantage and currently stands out as the industry leader with a market share of 18.4% and catering to the both northern and southern zones of the country. Lucky Cement is followed by D.G.Khan Cement, the former leader. DG Khan Cement's new plant at Chakwal started trial production in March 07. With the new cement plant of DGKC coming online in June of this year, the market share of DGKC has surged to 13.35% from 10.34% at the end of FY07. Pakistan Cement managed to grab the third position holding 9.05% of the market. Maple Leaf Cement registered itself as one of the export oriented player and was able to enhance its overall market share to 8.7%. Apart from these players the rest of the industry shares 42.5% of the market which include as much as 20 manufacturers.

MARKET SHARE - 4M/FY08

Lucky Cement

18.4%

D.G.Khan Cement

13.4%

Pakistan Cement

9.1%

Maple Leaf Cement

8.7%

Bestway Cement

8.0%

Others

42.5%

INCREASED FDI IN THE SECTOR

The cement industry was amongst the few bright spots in LSM sector during fiscal year FY07. Production growth accelerated during the year, helped by the substantial capacity additions in recent years, a booming domestic construction industry and strong export demand. It may be noted that the capacity additions in the cement industry during FY07 meant that at end-June 2007 the industry had excess capacity of about seven million tons. However, the industry's prospects remain strong due to (1) the strong potential for exports to India, domestic demand is expected to increase in the backdrop of increase in public sector development expenditure, as well as continued strength in the housing construction industry. Along with that reason behind privileged investment during current Jul-Aug 2007 was mainly due to its improved infrastructure, cheap labor and easy availability of raw material. Pakistani market is growing due to huge local and international orders, as presently South East Asia region, Gulf counties and India are facing huge shortage of cement due to tremendous development work. During Jul-Aug' 08 cement sector has attracted US$41.4m of foreign investment as against US$44.7m in FY07, surging by 780%. Whereas, itself in Jul-Aug' 08 foreign investment in the sector has been increased to US$36.7m, as compared to last year.

FUTURE OUTLOOK

Recently seven Pakistani companies have acquired the provisional certification from Bureau of Indian Standards, Pakistani traders are eying export of six million tones of cement per annum. Pakistani cement is comparatively cheaper than Indian cement, which sells in India in the price band of Rs.235-250 per bag, will make it much more attractive with the Indian construction and real estate boom. During the last Pak-India trade talks in New Delhi, some decisions were made to remove barriers by India for Pakistani exports. Pakistan is surplus in cement and India can become heaven for the Pakistani cement exporters as cost of transportation will be low as compared to other countries. Even though export numbers are increasing but currently cement export to India is very low as compared with other countries and stands at only 6% of the total cement export of the country. Cement exports could only be enhanced if transportation is done through road instead of rail or other means. The road transportation is cheaper and carry more stocks, thus increasing the export and decreasing the cost.