Pearl Securities Limited – Cement in Focus

Karachi, January 09, 2015 (PPI-OT): Dispatches review – Strong industry sales, up by 6% YoY in Dec’14

Synopsis

Volumetric sales by the cement sector have gained momentum in the final month of the outgoing year. Total dispatches by the industry have improved to 3.11mn Tons in Dec’14, showing solid growth of 6% YoY and 3% MoM against volumes of 2.95mn Tons in Dec’13 and against 3.03mn Tons in the previous month. During 1H FY15, overall industry volumes have improved by 6% YoY to reach 17.12mn Tons against 16.12mn Tons in the same term last year.

Combined industry local dispatches increased by 9% YoY while total exports declined by 2% YoY due to maintained pressure on northern exports.

There is strong activity in the cement sector backed by macro positives surrounding the industry, as presented in Pearl Securities Limited’s report dated 1 st Jan’14. Solid industry sales in the outgoing month show validation of investor commitment to the sector.

Local dispatches gaining momentum, up by 8% YoY in Dec’14

With maintained GoP commitment to development and better private sector construction, local dispatches have improved to 2.5mn Tons in Dec’14, up by 8% YoY and 6% MoM. Northern manufacturers are leading the pack with local sales of 2.09mn Tons, up by 8% YoY and 4% MoM. Southern companies have also improved volumes to 0.42mn Tons, showing an increase of 6% YoY and 15% MoM.

During 1H FY15, industry local volumes stand at 13mn Tons, increasing by 9% YoY against dispatches of 11.98mn Tons in the same period last year.

According to news updates, the government has released a total of PKR 149bn for development under the PSDP programme which makes up only 28% of total budgetary allocation of PKR 525bn. If the remaining funds are released timely during 2H FY15, domestic cement volumes will show sustained growth.

Northern exports remain subdued

Exports by northern manufacturers remain under pressure during Dec’14, showing volumes settle at 0.36mn Tons, declining by 18% YoY and 18% MoM. As expected, export pressure is prominent in the Northern region due to slow demand from neighbouring Afghanistan.

During 1H FY15, export volumes by northern companies stand at 2.54mn Tons, showing a decline of 10% YoY against dispatches of 2.81mn Tons in the same term last year.

Southern exports picking up pace

On the other hand, exports by southern companies are improving consistently. During Dec’14, southern region exports stand at 0.25mn Tons, improving significantly by 35% YoY and by 16% MoM. Exports have improved as Pakistani cement is gaining market status in foreign markets such as Sri Lanka, South Africa and other Sub Saharan countries.

During 1H FY15, southern exports stand at 1.52mn Tons, showing growth of 14% YoY against exports of 1.33mn Tons in the same period last year. Pearl Securities Limited have already issued a brief review and valuation dated on January 01, 2015 giving a review on the cement for CY14.

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