December 10, 2001	Monday	Ramazan 24, 1422

AFTER having passed through a prolonged recession during the last over a decade,the cement industry is limping back to financial viability on the perception that production surpluses are expected to be fully utilized in the years to come.

The industry optimism about the maximum utilizaion of the installed capacity is based on the recent three major developments: Building of the Gawdar Port,reconstruction work in Afghanistan after the end of war,and conversion to cheaper coal-fired system instead of the current furnace oil-based production process.

The general thinking is that the two projects will need an enormous amount of cement after the work on them starts,while the conversion process though a bit expensive will lower their production costs, making the commodity more competitive price-wise to compete with the foreign stuff.

Both are multi-billion rupee projects and once the work on them starts the local industry is expected to gear up to meet the entire demand spread over couple of years,leading it to financial viability after the projects complete.

A couple of leading companies,notably Cherat Cement and D.G.Khan Cement have already opted for the cheaper mode of locally available raw material and are expected to swicherover to the new system by the end of the next year and some more are ready to follow them.

Alhough scientific mining of huge Lakhara coal reserves estimated at 80 billion tonnes in the absence of modern technology is stillfar away but supplies being arranged through manual methods are adequate enough to meet the demand of the entire cement sector,industry sources said.

“Whether or not the industry,which is currently thriving on the benefits of cartels,which maintain prices above the Rs.200 per bag after cutting daily production will pass on the benefits of low cost to the consumers is a debateable question”, some financial analysts fear.

There could be many slips between the cup and lip in between but most analysts believe the future outlook for the industry as a whole is not that bleak as it has been before the opening of the new consumption channels.

“The reconstruction work in Afghanistan after the massive devastations of airport landing strips, buildings,dams and other public places by the US-led heavy bombing could give the anticipated push to the local industry is unclear but it could certainly claim its due share”,they say.

Iran India, Russia and some leading multinationals may be in the line to claim their share of the expected bonanza owing to large production lines and lower cost of production as compared to that of the local industry.

However, it may be deceptive but this optimism is shared even by most pesimist analysts who say “the push is there but much will depend on the wisdom of the sponsors, “how they venture to take the initiative”.

Having a paid-up capital of Rs.22 billion,most of the 20 listed cement shares on the country’s bourses are ruling well below thier face values owing to continued recession, production losses, and higher costs.

Some of the leading among them tried to exploit markets in Afghanistan, Iran and the Gulf but in the absence of official spport or supporting duty concessions, export outlets could not be exploiated.

The central Asian states also offered a luractive export outlet via the overland route through Afghanistan during the last couple of years but higher costs rendered the exportable surpluses incompetitive.

The new developments in the neighbouring countries and industy’s own initiatives has raised hopes it will run to full capacity and will efficiently market the entire production of 20 million tonnes in a year.

The oldest among them is the Zeal-Pak Cement Factory,which has now been privatized,which was listed on the Karachi Stock Exchange in 1975, and the last is Seaway Cement,having a paid-up capital of Rs.1.934 billion listed during the current year.

Chakwal Cement has the largest paid-up capital of Rs. 5.624 billion followed by Lucky Cement Rs. 2.450 billion but its 10-rupee share is being quoted at only 90 paisa.

Cherat Cement and Kohat Cement are the only companies,which have paid cash dividend at the rate of 20 percent during the financial year ended June 30,2001. Shares of both the companies are ruling well over their face values at Rs.19.00 and 16.50 respectively and so are of the Bestway Cement, Mustehkam Cement and Zeal Pak Cement at Rs. 10.75,13.00 and 13.10 in that order.