Future Outlook – Sales & Growth
The robust growth of 32% cement demand both in domesticsand export markets during FY ‘07, continued as cumulativedispatches for 10 months FY ’08 showed an increase of 25%.Total domestic consumption grew by 1% YoY while exportsgrew by whopping 157% YoY.
Hike in Cost
The industry debt to asset ratio is 60%, the recent volatility ininterest rates is likely to affect the finance cost significantly.However companies including DGKC, LUCK & MLCF haveentered into interest swap agreements linked to Libor.On the other hand coal prices in Intl’ markets have reached toUS $142/ton during Feb ‘08 which were US $80 last year,increasing cost by PKR 32 per 50kg bag and oil pricessoaring at US $133/barrel have increased the cost of production.
Hike in Prices
The price increase of PKR 40-45 per 50kg bag during theyear, due to impact of rising coal & fuel prices, have beenpassed on to consumers which indicates margins are expectedto remain intact in the short term.Cement Sector MKT CAP
Cement Sector MKT CAP
Cement Sector Weightage in KSE 100
Cement Sector FY’07A FY’08E FY’09E
-32% 19% 28%
EV/ton US$ mn
$ 147 $ 93 $ 89
11.2 6.5 4.9
14% 13% 16%
Source: FCEL report on cement sector
Export Demand & Expansions
Local cement dispatches registered 7% growth at 20.6mn tonsduring 11months FY ’08. Demands from Mid Eastern &African countries gave significant boost to production whichstood at about 24m tons in FY ’07 and export revenues stoodat $23m in Jan ’08. The upward trend in cement demand islikely to continue for years to come as UAE finds it costeffective to import cement from Pakistan.
Sector P/E 11.5Capacity
37mnLocal demand 30.4mnExport demand 7mn9M FY ’08Production
21.9mn9M FY ‘ 08 Growthin % 24.79%Domestic 8.68%Export 140.24%No. of Companies 22
According to FY ’06-07
Pakistan’s Cement Sector Analysis Sample Securities (Pvt) Ltd