Cement sales expected to hit nine-month peak

Sector stocks rally seven per cent in 10 days,

KARACHI:

The first month of spring has brought good news for cement producers as sales for March are expected to reach a nine-month high, while prices have increased by four to six per cent.

Sales are expected to surge by 23 per cent to 3 million tons on a monthly basis, the highest in the last nine months, according to Topline Securities.

Cement sector stocks have rallied seven per cent in last 10 days, reflecting positive investor interest due to the rise and expected sales, said Topline Securities analyst Furqan Punjani in a research note.

Sales to cross 3m mark

Cement sales are expected to cross the three million mark in March 2011, up 23 per cent from February, with commendable improvement from the local side. From these, local sales are expected to increase by 25 per cent to 2.2 million tons while exports are expected to depict a growth of 23 per cent to 0.85 million tons.

Higher margin in local sales

Strong price discipline adopted by cement producers has increased prices by up to six per cent, to Rs375 per bag in a few days.

The new price hike comes on the back of an additional 1.5 per cent special excise duty on cement price imposed recently.

However, the impact of special excise duty was only Rs5-6 per bag, while prices have surged by Rs15-20 per bag, adds the research note.

The gap between local and export selling prices have further widened with this increase.

Local selling prices stand 36 per cent higher at Rs245 per bag, compared with export price of around Rs180 per bag ($42 per ton).

The price differential bodes well for producers having higher share of local dispatch is their sales mix, added Punjani. With domestic dispatches picking up, cement producers will continue to pass on cost pressures on to the final consumer; thus protecting their margins.

Published in The Express Tribune, April 5^th,  2011.