LAHORE - The Pakistani cement industry is expected to post almost flat growth during the month of October 2018. However, cement consumption is expected to settle at 3.9 million tons, highest in 4MFY19 with month-on-month growth of around 3 percent, as per industry sources.
Industry experts expect considerable growth in exports where they anticipate dispatches to remain over 700,000 tons, a growth of more than 70 percent annually.
This growth in exports is on the back of higher clinker sales to regional countries amid clinker production constraints in China due to strict environmental regulation. These constraints are expected to sustain in the near future, they added.
They expect volumetric decline in domestic sales in Oct 2018 amid slowdown in construction activities.
In 4MFY19, local dispatches are expected to fall by 4 percent while exports will show significant improvement of up to 49 percent annually during the same period, better than the expectations. Experts said that industry posted its fifth consecutive fall in quarterly profits, as sector’s gross margins have now contracted to 24 percent, as compared to a high of 46 percent in 4QFY16. In 4QFY18, sector margins were recorded at 26 percent.
They believe that further downside in margins should be limited going forward as Pakistan cement industry’s margins are now in the range of regional average of 20-25 percent. Industry volumes grew by 4 percent YoY in 1QFY19 thanks to exponential growth in exports, +39 percent YoY while local dispatches remained almost flat. They attribute higher exports to currency devaluation, additional production from new capacities in South and higher clinker sales to regional countries on the back of closure of some clinker production lines in China owing to strict environmental regulation.