Just like equity market volumes having been supercharged so far, cement volumes have also unleashed their bull-run during the just-concluded month of March, said the analysts at InvestCap.
Even with the very onset of the summer feel, the analysts said cement sector volumes had started warming up their muscles as the total cement volumes in March 2012 had recorded solid growth, a straight 27 percent MoM, with total monthly volumes standing at 3.18mn tons.
Most encouragingly, volumes on the local front punched in the highest growth of 32 percent MoM in the month of Mar-12, and it was hard to locate a growth this high in the recent years, especially in March. Local volumes stood at 2.55 million tons with country’s northern region taking the maximum lead with 2.07 million tons of dispatches (up 33.9 percent MoM, 16.4 percent YoY) and southern region sharing the rest, with a healthy growth of 23.0 percent MoM and 8.6 percent YoY during Mar-12.
Not only on the local front did cement volumes show such massive growth turnaround, export dispatches also turned green with marked improvement of 11.2 percent MoM revealed during Mar-12. Positive volume growth in exports was recorded after a persistent decline since Dec-11, with total export volumes clocking in at around 630k tons in Mar-12 against 567k tons in Feb-12. However, on a YoY basis, exports during Mar-12 were still down by 23 percent. As far as cumulative cement volumes go, as a result of shining volumes growth recorded in Mar-12, total volumes growth during 9MFY12 improved to 3.6 percent YoY from 3.4 percent YoY recorded till 8MFY12.
Total cement volumes, in this regard, stood at 23.6mn tons during 9MFY12 (local 17.4mn tons, up 8.4 percent YoY, exports 6.2mn tons, down 7.7 percent YoY) against 22.8mn tons recorded during 9MFY11 (local 16.0mn tons, exports 6.7mn tons).
Though capacity utilization jacked up by 200bps MoM to 71 percent, it was still down 400bps YoY (against Mar-11’s) while average utilization stood at around 71 percent during 9MFY12, down 100bps YoY.
Such massive jump in volumes coupled with consistently rising prices on both local (over Rs 8,500/ton or Rs425/bag) and export fronts (over USD60/ton FoB), and a high degree of financial leverage (DFL) with relatively stable production costs (mainly coal prices), should all translate into windfall gains for the entire sector with a massive turnaround in return on equity for sector’s shareholders.
“We expect another excellent quarter i.e. 3QFY12, in terms of financial performance for the entire cement sector on the basis of flourishing profit margins which almost all of the companies have now been sailing through,” said Yawar Uz Zaman and Khurram Schehzad of the InvestCap. The analysts expect DGKC, LUCK, FCCL, ACPL, MLCF, LPCL, BWCL, KOHT and few others taking the lead in terms of profitability.
