07 December 2004	Tuesday	24 Shawwal 1425

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KARACHI, Dec 6: Cement exports in the first five months of the current year (July-Nov 04) increased by 63 per cent to 673,877 tons, from 413,426 tons in the corresponding period of the previous year.

The destination was mainly Afghanistan via the Torkhum and Chaman passes. But on month-on-months basis, exports in November fell 39 per cent, which the market attributed to a host of factors including the onset of the winter season; 15 per cent increase in cost of steel used in construction and the usual slowdown of construction activity in Ramazan.

Dealers said that among Cement companies, Best way topped the list of exporters with 19,000 tons of exports during November followed by Cherat, which delivered 12,000 tons across the boarder.

There is a mixed view on whether exports would bring in concrete results for the cement companies in the country, for some analysts believe that Pakistani cement is expensive when compared to the regional players such as, India, Indonesia, Malaysia and Thailand.

Data released by the All Pakistan Cement Manufacturers Association (APCMA) showed that capacity utilization in the cement sector remained at a high of 92 per cent, up from 77 per cent utilization in the corresponding period of the previous year.

Capacity utilization for plants in the northern zone averaged 97 per cent, while those in the South was around 77 per cent; the difference due to the formers' proximity to Afghanistan as well as the location of major plants in the Northern zone.

Cement dispatches rose 25 per cent on year-on-year basis during the first five months of FY05 to 6.5 million tons from 5.3m tons during the same period last year. Local sales grew 26 per cent to 6.5m tons for July-Nov 05.

Since cement stocks have been the apple of investors' eyes, research teams at all leading stock brokerage firms commented on the latest data and expressed opinion on what might lay ahead.

Analyst, Ali S. Janjua at First Capital noted that D.G.Khan Cement, Pakistan's biggest cement plant, continued to lead with dispatches in excess of 607,000 tons, followed by 549,000 tons for Maple Leaf and 465,000 tons for Lucky Cement during November 2004.

"Northern cement manufacturers, with three times greater capacity than their southern counterparts, have led dispatches with 4.6 million tons as compared to 1.3 million tons for the southern zone.

Analyst Sadaf Yousuf at Taurus Securities predicted profitability of cement sector to boost with the start of calendar 2005. "Recently world coal prices have dropped significantly to average around $51.82 per ton as against $ 77 per ton during the last two months (Rs6,000 per ton imported)", said the analyst, adding: "This decline would be visible in 3Q04 profitability as most of the companies have bought coal at previous rates.

The decline coupled with the recent Rs10-15 per bag increase in market prices of cement (to average between Rs245 to Rs250 per bag) is to have a positive duel effect on cement sector margins and thus profitability going forward."

But sector analyst Shagufta Irshad, at KASB Securities thought the prospects were not very bright. Continuous delays in any announcement over the major dam projects including Kalabagh and Bhasha dams, increasing international prices of coal and steel and right issues by cement companies were thought to be dampener on cement sales and profitability. Analyst

Fariha Tayyab at Global Securities calculated that the weighted average price-to-earnings ratio (PER) for five Pakistani sample manufacturers (Cherat; DG Khan; Lucky and Maple Leaf) was around 12.7 per cent, which was at approximately 25-27pc premium to market PER of 9-10 per cent.

But the analyst feared that the cement sector was relatively risky to invest due to the volatile nature of cement stock prices and an expected growth slowdown in dispatches.

According to First National Equities, sales volume of Lucky Cement rose the most by 51.3pc in 1Q05, compared to same period in FY'04. Others included: Dera Ghazi Khan sales volume increase by 36.8pc; Bestways 30 per cent; Fauji 20.5pc; Maple Leaf 16.2 per cent and Cherat Cement 10.3 per cent.