Cement dispatches decline 8 percent YoY


Karachi: Total cement dispatches have declined by 8%YoY to 31 .4mn tons in FY11, where local dispatches were down 7%YoY to 22.Omn tons and exports were down 12%YoYto 9.4mn tons.

According to AKD Securities, lower dispatches resulted on the back of 1) Aug’10 floods, 2) delay in reconstruction activities and 3) enhanced capacities in export markets. That said, with Budget measures expected to usher in positives, AKD Securities expects a rebound in local volumes to -24mn tons in FY12. While local dispatches may take a seasonal dip in Aug’11 (Ramadan effect), demand should pick up from Sep’11 onwards. Likelihood of higher dispatches coupled with margin expansion supports our bullish case for Pakistan Cements.

Local Dispatches- Good times to come! Local dispatches reported a decline of 7%YoY to 22.Omn tons in FY11. Sequentially however, domestic dispatches reported an impressive growth of 8%MoM to stand at 2.O3mn tons in Jun’11. This comes on the back of a consistent sequential decline in the past few months, marking the Rabi harvest (geographical shift of construction workers to rural areas) and lower demand in anticipation of Budget positives. Barring likely seasonal dip in Aug’11 (Ramadan effect), AKD Securities believes MoM increase in Jun’11 serves as a precursor to demand revival in FY12 where AKD Securities projects local dispatches to register at -24mn tons. Construction of dams (if materialized) should provide additional demand.

Exports- Land routes to deliver! Exports dispatches reported a decline of 12%YoY to stand at 9.4mn tons in FY11, likely due to lower sea exports (added capacities in export markets). Sequentially however, the decline is much lower (1 .14%MoM) in Jun’11 against a decline of 6%MoM in May11, most likely due to increasing exports to Afghanistan. Going forward, while prospects for sea exports may remain limited, AKD Securities expects land routes such as Afghanistan (post domestic infrastructure repair) and India (subject to the opening of rail routes) to deliver. AKD Securities estimates exports to total –10mn tons in FY12.

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