Following in the footsteps of northern region companies, cement manufacturers in the southern region have also increased prices by Rs15 to Rs400 per 50kg bag.
Cement manufacturers have continued to increase prices over the last few months, despite a reduction in excise duty from Rs700 to Rs500 in the budget for 2011-12.
When the government reduced the duty in June this year, analysts expected that cement manufacturers would reduce prices in the range of Rs15 to Rs25 per bag, owing to a decline in their cost of production.
Asad Siddiqui, analyst at Invest Capital, told The Express Tribune that sales volumes of cement has remained low over the past few months and to compensate for it, cement companies are increasing prices.
“After the reduction in federal excise duty, the market was expecting a decline in cement prices. Instead of decreasing, companies have increased prices,” said Siddiqui.
Average cement prices in the northern region of the country are between Rs415 and Rs420, while prices in the southern region are in the range of Rs400 to Rs405, he said, adding that average cement prices over the last six months have hovered between Rs370 and Rs425 per bag.
In the last fiscal year, most cement companies faced losses and the sector posted dismal financial results. This year despite low sales, companies have made profits owing to the increase in prices.
AKD Research on Wednesday reported that the uptrend in cement prices is expected to continue until December this year. Sales of cement sector grew by 14 per cent year-on-year to Rs124 billion in fiscal year 2011 compared to Rs109 billion in the previous year.
The revival of small cement companies including Mustehkam, Kohat and Dewan Cement, posting YoY growth of 159%, 65% and 46% respectively, mainly contributed to this growth.
Meanwhile, big companies like Lucky Cement posted nominal growth of 6% on a yearly basis.
Published in The Express Tribune, October 6th, 2011.
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