Pakistan cement sales are expected to increase by 22-26% MoM to 4.0-4.2mn tons with local dispatches likely to be jump 20-24% MoM mainly due to (1) higher working days in Aug-2022 compared to Jul-2022 amid Ashura holidays in July and (2) slight pickup in construction activity post monsoon season.

On YoY basis, cement sales in Sep-2022 are anticipated to decline by around 9-13% YoY. Local dispatches are likely to be down by 10-12% YoY due to (1) slowdown in overall economic activity, (2) higher construction cost, and (3) intense rain and floods, we believe.

Exports during Sep-2022 are likely to increase by around 38-42% MoM, while they are likely to witness a decline of around 3-7% YoY. The attrition in exports are on the back of global economic slowdown.

In 1QFY23E, cement sales are expected to fall by around 25-29% YoY with local sales also posting a decline by 25-29% YoY. Lower offtakes in local cement dispatches is on the back of 1) higher than expected rains across country causing floods, 2) rising construction cost, and 3) inflationary impact restricting the demand growth.

Capacity utilization based on local demand is expected to touch 61% in Sep-2022, wherein in the North region the utilization is expected to be around 66%. Total overall capacity utilization (including exports) is expected to reach 70%.

Looking at the total sales in 1QFY23, capacity utilization is expected to clock in at 54% whereas based on local sales the same is likely to be around 48%.

Cement retail prices in Sep-2022 averaged at Rs1,028/bag in North, with slight decline from Aug-2022. The same averaged at Rs1,040/bag, down Rs12/bag from last month.

With higher interest rates, expected slowdown in economic growth and contained PSDP, we expect cement dispatches to fall 12% in FY23.

Courtesy – Topline Securities