KARACHI, Dec 21: Cement manufacturing companies in Pakistan, suffering a devastating financial year 2001, are looking over the borders for the start of reconstruction and rehabilitation work in Afghanistan.

The influential Financial Times, London, wrote in its December 4 issue: “If billions of dollars flow in to Afghanistan, Pakistan is well positioned to benefit from some of that flow. In just one example of recent developments prompted by the hope of large amounts of western aid pouring into Afghanistan, some businessmen in Karachi acknowledge they have quietly begun picking shares in cement stocks. They expect cement businesses to record large profits on the back of exports to Afghanistan for reconstruction.”

But hopes of all cement manufacturing companies that the reconstruction of Afghanistan — if and when that takes place — would herald prosperity for Pakistan’s cement producers, do not run very high.

“Iran, Russia, India and the Central Asian States, would all prove fierce competitors”, says one manufacturer with plant a little away from the northern border. He says that Pakistan may be at advantage on account of ‘low freight’, but if the country does win the contract for supply of cement for the reconstruction of that devastated country, the reasons would have to be more ‘political’ (reward for taking up the front-line position in war against terrorism) than ‘commercial’ (better quality and lower selling price).

There are around 22 cement factories in Pakistan with total installed capacity to produce 16.10 tons of clinker/cement per year. With the demand at just about 10 million tons, an overwhelming capacity remains idle.

Financial year ended June 2001, saw many profitable cement companies in Pakistan, plunge into losses. Companies that already were in the red, saw their deficits widen further. “The fresh crop of cement companies’ financial results are still coming in, but the numbers already released show almost an across the board rout”, confirms a cement sector analyst.

Maple Leaf Cement Company posted a huge loss of Rs284 million for the latest year, whereas a year ago, the company had made profit amounting to Rs2 million. Fecto Cement, likewise dipped into losses of Rs80 million, from profit of Rs83 million. Profit at Cherat Cement dipped to Rs75 million, from Rs162 million and at Dadabhoy Cement the earnings slid to Rs30 million, from Rs55 million in 2000. Some cement companies have posted frighteningly whopping sums in losses: Fauji Cement: Rs571 million; Pioneer Cement: Rs294 million; Dandot Cement: Rs264 million; Mustehkam Cement: Rs136 million; Gharibwal Cement: Rs105 million and Javedan Cement: Rs92 million.

A giant leap in price of furnace oil — that accounts for nearly half of all the cost of cement production — and higher taxation including the 15 per cent sales tax imposed on September 5, 2000 on all except three plants in the NWFP, were lamented by the cement producers to be the concrete reasons for the collapse of cement companies’ earnings. Sector analysts point out that the break-up of the unofficial cement ‘cartel’ between July and December 2000, was yet another reasons for the erosion of cement companies’ margins of profit.

Companies in the business are beginning to look up, as the ‘cartel’ is understood to have revived in early 2001. But given the high installed capacity, cement producers are hoping for the start of the ‘mega’ public sector development projects. In order to cut costs, most plants are in the process of switching over from high cost furnace oil to alternative fuel, such as coal or gas.