Pakistan cement to see modest growth on higher exports in FY24-25

Research house AKD Research has projected that Pakistan’s cement dispatches will grow at 2.4 per cent YoY, primarily due to increased exports between June 2024 and July 2025. This follows a two per cent expansion in FY23-24, driven by higher export volumes, while domestic sales fell to a seven-year low.

Despite introducing an increase in federal excise duty (FED) on cement in the FY24-25 budget, AKD Research reassures that the industry has successfully passed on this increase to customers. This resilience has resulted in a rise in cement prices by PKR125-149/bag (US$0.45-0.53/bag). The analysts maintain a bullish outlook on the sector, underpinned by healthy gross margins, strong earnings and monetary easing. 

Cement dispatches in FY23-24
Cement dispatches reached 45.29Mt in FY23-24, an increase of two per cent YoY. Higher export volumes, increasing 56 per cent YoY to 7.11Mt, primarily drove the modest growth, while domestic sales fell to a seven-year low (33.2Mt, down five per cent YoY). The decline in local sales was mainly attributed to a slowdown in construction activities due to elevated construction costs, higher inflation and record interest rates. The southern region played a significant role in the export surge, with a 62 per cent YoY increase. The drop in international coal prices supported Pakistani cement exports.

In June 2024 local sales declined by 12 per cent YoY to 3.1Mt due to fewer working days amid the Eid holidays. Similarly, exports also dropped by 18 per cent YoY, primarily due to reduced clinker sales from the south.

Outlook FY24-25
AKD Research projects YoY dispatches growth to be 2.4 per cent in FY24-25, primarily due to increased exports. However, local cement sales growth is expected to remain subdued, as the impact of broad-based growth and higher Public Sector Development Programmes (PSDP) allocation is likely to be overshadowed by a significant increase in cement prices required to pass on the effect of incremental FED. 

Exports are expected to increase by ~13 per cent YoY, given lower coal prices and stable freight rates amid tapping new export markets. Subsequently, total industry utilisation is expected to remain at 55 per cent, with cement prices averaging at ~PKR1.5k/bag during the year. However, the analyst anticipates companies with higher leverage will benefit from monetary easing.