Pakistan's cement industry performed well during 1HFY17, report local analysts. The industry's profitability soared by 12 per cent YoY to PKR29bn (US$276m), as compared to PKR26bn recorded in the corresponding period last year. Experts attribute the increase in profitability to higher dispatches, improved gross margins to 43 from 42 per cent and lower financial costs (-44 per cent YoY).

According to Spectrum Securities  (Private) Ltd, total dispatches for the same period amplified due to local cement demand from higher development spending and better private construction activities. Furthermore, housing finance amplified by 10 per cent YoY to PKR52.8bn in 1HFY17, amid a low interest rate in the country.

The low interest rate has resulted in surge in construction activities across the country that has also resulted in higher cement dispatches. During 1HFY17 industry dispatches lock-up by nine per cent, due to higher local cement demand, wherein capacity utilisation stands at ~84 per cent in 1HFY17.

Local cement dispatches went up by 11 per cent YoY, which can be largely attributed to resilient local cement demand (government has released ~54 per cent of PKR431bn PSDP allocation). Regional data shows that, north and southern areas posted dispatches growth of ~10 per cent YoY and 16 per cent YoY, respectively. 

Whereas export dispatches continuously decreasing since South Africa imposed anti-dumping duty on Pakistani cement.

Furthermore, Pakistan cement manufacturers have lost market share in Afghanistan amid availability of cheap Iranian cement, which have consequently reduced export dispatches by 2.3 per cent YoY in 1HFY17.

Going forward, higher Public Sector Development Programme (PSDP) allocation and lower interest  rate would further derive consumption of the cement in public and private sector. Moreover, the government announcement to allocate PKR12bn for the housing sector in its next budget will riase cement demand in future so almost every company has announced an increase to its existing capacity, hence Pakistan's cement capacity will reach at 68Mt in 2020.