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October 30, 2020

Cement sales expected to reach all-time high in October

Business

October 30, 2020

KARACHI: Cement sales and exports are expected to post double-digit growth in October over the corresponding month a year earlier as the government’s incentives to real estate sector are boosting the construction activities, a brokerage said on Thursday.

Sales and exports are likely to increase 15 percent year-on-year and 10 percent month-on-month to 5.7 million tons, according to Topline Securities.

Local sales are likely to clock in at 4.8 million tons, up 15 percent year-on-year and 18 percent month-on-month due to initiation of construction work on dams and injection of more liquidity in construction and housing sector. The government announced incentives package to lure undisclosed investment in the real estate sector. Loans to the construction sector increased 7.5 percent month-on-month to Rs336 billion in September, according to the State Bank of Pakistan.

In October, exports are likely to increase 19 percent year-on-year, but decrease 17 percent month-on-month.

“This sequential decline is likely as local sales are gaining momentum and industry is achieving its full utilisation,” said Shankar Talreja, analyst at Topline Securities. “This is likely to take industry’s capacity utilisation (adjusted for closed plants) to 103 percent in October versus 94 percent in September.”

In 4MFY21, total sales are likely to reach 19.3 million tons, an increase of 20 percent year-on-year, wherein exports are likely to grow 31 percent year-on-year and local sales by 18 percent year-on-year. Sales from north-based mills are expected at 13.6 million tons, up 19 percent over the corresponding four months a year ago. From South-based mills, cement sales are likely at 2.1 million tons, up 11 percent year-on-year.

Lucky Cement’s sales are likely to clock in at 946,000 tons, an increase of 49 percent year-on-year. DG Khan Cement’s sales are likely to clock in at 820,000 tons, up 17 percent month-on-month.

Cement prices in the north region during the outgoing month averaged at Rs550/bag, up Rs16/bag from average of September. Prices in the south remained same at Rs610-615/bag.

The cement industry made heavy investments in new plant and machinery and modernisation over the last few years, which made availability of cement at very competitive rates compared to other countries in the region.

Cement makers said cement is subject to very high taxes including federal excise duty of Rs1,500 per ton equivalent to Rs75 per bag. Government must abolish federal excise duty as this is not a luxury product, they said.