Cements: Local off take remains dull though low base jacks up YoY growth

Karachi: According to Elixir Securities, local dispatches marked up during 2MFY12: Local off take marked up by 14% YoY to 3.7mn tons during 2MFY12 primarily due to low base effect of FY11.

Local dispatches during 2MFY11 were down 14% YoY due to logistical barriers caused by devastating floods.

Adjusting 2MFY11 base parallel with 4% YoY decline during Oct‐10 to Jun‐11 would limit 2MFY11 growth to a mere 2% YoY Export off take remains sluggish: Export dispatches posted a decline of 7% YoY to 1.5mn tons during 2MFY12 primarily due to slow construction activities coupled with un‐alluring cement prices in the export markets.

Afghanistan and India propped up, rising 18% and 68% YoY during 2MFY12 due to robust construction activities in Afghanistan during July and renewal of Bureau of Indian Standards (BIS) licenses to cement manufacturers.

Lower Govt levies will lead to margin expansion: GOP has provided relief to cement manufacturers by lowering govt levies which would enhance Elixir Securities’ FY12 EBITDA margins by PKR460/ton from its current level of PKR900/ton.

However, Elixir Securities maintains a prudent stance and expect manufacturers to pass on the benefit of lower cement prices to the final consumer.

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