Improving prices forecast to raise margins, Pakistan

Pakistan cement industry is forecasted to earn good margins during the last quarter of the current fiscal as cement prices increase on rising sales volumes.
 
According to a report by InvestCap, local cement manufacturer and exporter firm Fauji Cement (whose capacity has been increased by commissioning of a new 7200tpd plant in 1HFY12) would be the main beneficiary of an increase in prices followed by Lucky Cement, DG Khan Cement and others.

The report noted that cement prices are on the rise with dispatch growth to increase sector profits. Ahead of the expected rise in demand during the summer season, cement manufacturers have raised prices by an average PKR200/t (PKR10/bag) while it is expected that cement prices would further jump up by another PKR10-15/bag on account of the significant increase in domestic cement demand during the Apr-Jun period.
 
During the current year (FY12), cement prices have followed an upward trajectory and posted an increase of nine per cent from July 2011 to date, to reach PKR425/bag. While local cement demand during Jul-Feb 12 stood at 7.4 per cent YoY, it is expected to increase from March onwards to settle at above eight per cent, where dispatches are expected to register ~2.4Mt (up 24 per cent MoM and eight per cent YoY). At the same time, export demand  is also expected to be around 0.68Mt (an increase of 20 per cent MoM, but down 17 per cent YoY) during March 2012. As such, improvements in total dispatches along with healthy cement prices, the Pakistan cement sector is expected to post another impressive quarter.