Karachi, September 05, 2022 (PPI-OT): Pakistan Cement: Cement dispatches declined 35%YoY in 2MFY23

Local cement dispatches posted negative growth for Aug’22, declining by 34%YoY. Region-wise North and South witnessed a decline in local dispatches. Northern region sales declined by 21%YoY to 2.5mn tons while dispatches in the South decreased by 40%YoY to 0.41mn tons. However on monthly basis local dispatches showed an increase of 55%MoM in Aug’22 due to lower base.

Richards Bay coal prices have contracted slightly by 5%MoM in Aug’22, currently hovering around US$328/ton compared to FYTD/CYTD avg. of US$330/289/ton. However, on the local front, recent corporate results of various cement players such as LUCK, MLCF, and CHCC indicate effective inventory management has been at the forefront of corporate profitability for the local players’ as they were able to increase gross margins by 6.8pptsQoQ in 4QFY22.

Devastation caused by recent floods is likely to add much needed injection to the construction demand where rough estimates suggest that around 5-6mn tons of demand likely to be generated as 2.5-3mn new houses are to be built, as per news flow.

In this backdrop, we believe, the cement sector likely to continue to lead the rally as it did in the outgoing week, up 4.0%WoW. Therefore, we continue to advocate for LUCK, MLCF and FCCL with the companies having low leverage on their balance sheets in a high interest rate environment and cost efficiencies.