LAHORE – The cement sales in Jan-12 stood at 2.5 million tons against 2.4 million tons in the corresponding period last year.

According to All Pakistan Cement Manufacturer Association (APCMA), local dispatches witnessed an increase of 2 per cent YoY while severe winter has affected the local demand on a MoM basis (down by 3.8 per cent). Interestingly, exports were up by 4.5 per cent YoY, nevertheless demand in the export market was evident as exports plunged by 15.1 per cent MoM. Cumulatively in 7MFY12, total dispatches are up by 4 per cent YoY on the back of steady domestic demand. Although average retention prices in the local market have surged by 38-39 per cent YoY in 7MFY12, local dispatches rose by 7.2 per cent YoY, experts said. They added that this growth is partially due to low base as floods had hindered demand. Additionally, reconstruction work after floods of last year and strong remittances have helped in keeping domestic demand reasonably buoyant.

In Jan 2012, domestic demand is up marginally by 2 per cent YoY to 2 million tons. However, on a MoM basis, severe spell of winter in the country did weaken the local demand as domestic dispatches dropped by 3.8 per cent MoM.

Excess regional capacities along with high prices in domestic market have kept exports weak, down by 3.6 per cent YoY in 7MFY12. Though demand in Afghanistan and India has remained healthy, exports via sea have been falling. In Jan-12 exports are up by 4.5 per cent YoY but seasonality was apparent on a MoM basis where dispatches have declined by 15.1 per cent.   Lucky Cement Limited (LUCK) has just announced 1HFY12 financial performance of the company. In line with expectations, the company has reported more than double profit in 1HFY12 as its earnings increased by a massive 107 per cent YoY to Profit After Tax (PAT) of PKR3.02bn translating it into an EPS of PKR9.33 as against the PAT of PKR1.46bn in the corresponding period last year. The main reason behind the substantial boost in earnings can be attributed to 28 per cent YoY jump in monetary sales to PKR15.37bn in 1HFY12 as against the sales of PKR12.03bn in same period last year. The stunning boost in monetary sales was mainly because of augment in the volumetric sales and higher retention prices. During the 1HFY12 operating costs remained flat as there were recorded at PKR1.98bn as against operating costs of PKR1.97bn in 1HFY11 primarily because of decline in distribution cost by a 4 per cent YoY to PKR1.72bn. Conversely, financial charges declined by 42 per cent YoY to PKR170m in 1HFY12 as against PKR294m in the same period last year because of lower long term debt. Resultantly, LUCK has reported a substantial 120 per cent jump in PBT to PKR3.48bn in 1HFY12 as against the PBT of PKR1.82bn in 1HFY11.

Overall trend in cement volumes is fairly humdrum. Nonetheless, the industry is enjoying the price ride; consequently margins have shown an improving trend. Though the recent raid by Competition Commission of Pakistan (CCP) did generate jitters initially, experts reiterate that a major correction in prices is highly unlikely, still some minor adjustments cannot but ruled out.

Furthermore, reconstruction activities related to floods in Sindh and construction and extensions of dams (Bhasha and Tarbela) is likely to provide some impetus to cement dispatches going forward.