Local cement sales had another bumper month, increasing by 22% YoY for Jun’21 as incentives provided to the construction sector continue to bear fruit with most of the increase being contributed by private sector, revealed AKD research. On sequential basis, a significant increase of 46% was witnessed majorly on the back of May’21 being a low base due to Eid-ul-Fitr holidays.
Region wise, South stood out with an increase of 79/66% YoY/MoM as dispatches remained low in Jun’20 on the back of higher restrictions being placed in South due to COVID-19 while May’21 was a low base due to Eid-ul-Fitr holidays. On the other hand, demand center North witnessed an increase of 14/42% YoY/MoM. Staggering increase in local dispatches in South had an adverse effect of exports from the region as they declined by 39/17% YoY/MoM where according to AKD’s report, local manufacturers shifted their sales mix towards local sales in search of better margins.
Overall, cement dispatches for FY21 stood at 57mn tons – highest ever — increasing by 19%YoY where local dispatches increased by 20%YoY to 48mn tons buoyed by construction sector package while growth was amplified by low base due to COVID-19 related restrictions placed in 4QFY21. Exports on the other hand stood at 9mn tons for the year, increasing by 15%YoY, disclosed AKD’s report.
Data released by the All-Pakistan Cement Manufacturers Association also showed that cement companies in Pakistan have recorded their highest sales in the financial year 2020-21 since 1990.
According to experts, the FBR’s amnesty scheme had an important role to play in the high cement prices as it helped the government bring black money in the tax net. The cement stocks also showed satisfactory performance last one year and the share prices of some cement stocks like Lucky and Pioneer have even doubled. High demand for houses from people had also accelerated construction activity in the country.
Experts believe that once the Naya Pakistan Housing Scheme officially begins, the prospects for the construction sector and ultimately for cement demand will remain high. The expected construction of the dams would also contribute to high demand for cement along with higher Public Sector Development Program (PSDP) allocation for the year 2021-22, it is believed.
According to the report released by AKD research, coal prices have continued to cause trouble, increasing by 35% since Dec’20 however local manufacturers have increased prices by PkR25-35/bag during last one month and another increase of PkR20-25/bag is anticipated to fully transfer on the increase in coal prices.
AKD believes that though sector has remained under pressure presently due to increasing coal prices, it is expected to come back into limelight in 1QFY22 where they continue their preference for LUCK (TP: PkR1289/sh, 44% upside) and MLCF (TP: PkR80/sh, 72% upside).