Pakistan’s cement industry sales in Jan-2023 is likely to clock in at 3.6-3.8mn tons, down 5-9% YoY. However, the same is alkely to decline by 3-7% MoM.

§ Local sales are expected to be down by 2-6% YoY to 3.2-3.4mn tons amid slowdown in construction activity, overall economic slowdown and higher construction cost.

§ On MoM basis, Local sales are estimated to decline by 9-13% MoM, wherein average daily sales in the North and South regions are hovering at 84k tons/day and 22k tons/day, respectively. This decline is largely due to seasonal factor and in line with previous years where we see slowdown in cement sales in winter season.

§ Exports during Jan-2023 are likely to be down by around 22-26% YoY due to global economic slowdown, higher interest rates and unfavorable export pricing. However, MoM exports are likely to be up 2x due to export by D.G. Khan Cement (DGKC) to United States. This takes 7MFY23 industry exported sales down 43-47% YoY.

§ In 7MFY23E, cement sales are expected to fall by around 17-21% YoY with local sales also posting a decline by 13-17% YoY. Lower offtakes in local cement dispatches is on the back of rising construction cost and inflationary impact restricting the demand growth.

§ As per the Pakistan Bureau of Statics (PBS), Cement retail prices in Jan-2023 averaged at Rs1,029/bag in North almost similar to price witnessed in Dec-2022. In South, average prices clocked in at Rs1,070/bag, with an increase of Rs5/bag from Dec-2022.

§ Going forward, some recovery is anticipated as flood rehabilitation programs gains pace as we approach General Elections and post winter season. Declining coal prices could also provide support to the sector margins going ahead.

Courtesy- Topline Securities