Cement sales may falter as construction slows down

Demand expected to pick up after end of monsoon, Ramazan.

Farhan Zaheer August 07, 2013
Heavy rains and flood-like situation in many parts of the country were likely to bring down cement sales further in August. PHOTO: FILE

KARACHI: After recording a 10.4% month-on-month decline in July, cement sales are expected to drop further in August because of low construction activities, heavy monsoon and flood-like situation in many parts of the country, Investcap Research said in a report on Wednesday.

However, from September onwards, analysts expect cement demand to receive a boost.

Listing the reasons for low cement sales, Investcap reported these included the slow release of funds in July for the Public Sector Development Programme (PSDP), which is expected to pick up following the end of monsoon.

The federal government released just Rs14.5 billion in July, 2.7% of the Rs540 billion development programme for the current fiscal year that started from July.

Heavy rains and flood-like situation in many parts of the country were likely to bring down cement sales further in August, the report added. People usually avoid construction activities in Ramazan and monsoon season.

“But I personally think that sales will rebound strongly after August once Ramazan and the rainy season are over,” Asad Siddiqui, analyst at Topline Securities, said.

In July, cement sales fell significantly by 10.4% compared to a month earlier and dropped 8.3% against the same period a year ago. In the month, 2.58 million tons of cement was sold.

On the other hand, exports dropped a moderate 4.4% year-on-year in July. However, compared to a month ago, exports registered some improvement and rose 8.4%.

Despite the overall slowdown, cement prices rose 5.2% in a month to an average of Rs500 per bag in July. Year-on-year increase in prices was 12.5%. This is expected to reduce the impact of low sales on profits of the cement industry in the ongoing quarter.

Published in The Express Tribune, August 8th, 2013.

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