Cement exports show dismal performance, high input cost affecting production

Karachi: Cement exports have shown dismal performance as witnessed by paltry 0.21% increase in first quarter of fiscal year 2011-12 as compared to corresponding period last year.

All Pakistan Cement Manufacturers Association APCMA press release Friday said exports to different countries via sea route dropped significantly by 24% as compared to 1QFY11, standing at 0.857 million ton in 1QFY12. Exports to India rose by 53.8% but small volume of 0.163 million tons only in 1QFY12 was contrary to expectations of over 1.0 million tons increase due to improving trade ties between Pakistan & India.

Major factor behind limited exports is sharp increase in input cost as prices of almost all of major inputs like, furnace oil; coal, electricity etc., surged during first quarter of this fiscal year. Transportation cost also rose exorbitantly due to increase in diesel prices. In the meantime, there was no progress in cement exports by truck via Wagha Attari border post which if opened, can substantially boost export volume.

Cost of power increased by 9% in last three months from Rs 7.1 per KWH to Rs 7.7 per KWH with increasing load shedding and situation seems set to become worse with expected further increase of Rs 3.04 per KWH in power tariff. Diesel, coal, furnace oil prices also rose by 15, 8 & 28% respectively in first quarter of FY2012. Impact of this increase for upcountry plants is much higher as these inputs have to be transported from Karachi. Gas rate also rose in last 3 months by over 10% for cement plants and as well as their captive power units.

APCMA says local cement sales improved due to slight increase in local consumption which witnessed growth of 12.23% in first quarter of current fiscal 2011-12. Cement manufactures of northern region sold 4.23 million tons and southern sales stood at 0.945 million ton in Jul-Sep 2011.

In fiscal 2010-2011, 10 cement units suffered loss before taxation aggregating to Rs 5.27 billion and only 7 units, of which 2 located near Karachi in close proximity to sea port, earned profit of Rs 5.98 billion. At end of last fiscal, industry debts to financial institution amounted to a staggering over Rs 125 billion while equity is Rs 116 billion.

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