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Cement sales decline by 17 percent in August

04 September, 2013

KARACHI: Total cement dispatches in August 2013 dropped significantly by 17 percent on monthly basis to around 2.15 million tonnes as against 2.6 million tonnes in the previous month due to Eid holidays, Ramazan and a torrential rainy season, analysts said on Tuesday.

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KARACHI: Total cement dispatches in August 2013 dropped significantly by 17 percent on monthly basis to around 2.15 million tonnes as against 2.6 million tonnes in the previous month due to Eid holidays, Ramazan and a torrential rainy season, analysts said on Tuesday.

Similarly the cement dispatches posted 7.0 percent yearly decline to 2.15 million tonnes as compared to the 2.2 million tonnes in the corresponding month of last year.

As per the provisional sales figures of 29 days available with Arif Habib Limited (AHL), the total cement dispatches for August 2013 appeared to post a hefty 17 percent monthly decline, as Eid holidays, Ramazan and a torrential rainy season all contributed towards the drop, said Syed Abid Ali of AHL.

Domestic sales seem to have been hit the hardest with a 19 percent monthly drop to 1.5 million tonnes, while exports went down by 13 percent. A cumulative second month FY 2013-14 comparison also reflects a 7.0 percent yearly drop to 4.7 million tonnes as compared to 5.1 million tonnes during the same period last year.

Pre-buying in June 2013 (with expectations for price hike after implementation of higher taxation in budget) and more intense rains during the period so far contributed to the yearly decline in cement demand, Ali added. Only Attock Cement Pakistan Limited seems to have punched in 19 percent monthly growth, primarily because of threefold jump in exports, and Kohat Cement Company Limited posting 20 percent yearly rise amid better domestic offtake.

Though a 57 percent rise in the power tariff is in effect from August 2013, its impact would be more visible in second quarter of FY14, as August dispatches would be out of July 2013 production where the sector would have utilised low cost electricity. As far as prices are concerned, cement prices at retail level jumped 9.0 percent to Rs 502 per 50kg bag since budget, which would not be adding much to the margins as it is a pass-on for increased costs with respect to taxes and transportation, the analyst added.

The analyst advised a cautious stance on the sector, though he sees a minor probability of a price war. However, in a gloomy scenario, Lucky and Dera Ghazi Khan Cement would still be a safer bet given their low cost structure and dominant positions in the domestic market.

End.


 
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