cement ector an overview - pacra lucky cement limited 7,386,000 16% listed pezu and karachi...
TRANSCRIPT
CEMENT SECTOR – AN OVERVIEW
September 2015
Domestic Cement Industry
Abstract Nature & Structure Dynamics Performance Capital Structure Upcoming Expansions Conclusion & Sector Outlook
Pakistan’s cement sector, comprising 18 players, has an operational capacity of 46mln tons. The sector operates with two regions – North, having 81% share while South having 19% share of total operational capacity. Both regions have distinguished supply-demand dynamics, impacting sales volume. Local-Export mix (FY15: 80:20, FY14: 76:24) remained skewed towards domestic market. Further analysis reveals that local dispatches, on account of various on-going developmental activities and higher utilization of PSDP, witnessed growth (8%) which compensated the decline (~12%) in exports – a factor of plunging demand from Afghanistan. Hence, the overall cement dispatches registered an uptick of 3% YoY during FY15. Cement players continued to hold prices, though slight rationalization has been witnessed to pass the impact of decline in fuel and power costs. Key challenges will be (i) availability of cheaper Iranian cement post elimination of sanctions, (ii) rise in political instability with Afghanistan, (iii) delay in materialization of CPEC, and (iv) entry of Chinese manufacturers in local market. Nevertheless, strong local demand fundamentals are likely to keep the outlook on Cement Sector Positive.
ABSTRACT
Oligopoly
8 players dominating the industry with 70% capacity
share
Barriers to entry exists
Production arrangement
among players
Industry | Nature & Structure
Nature of Product Commodity | No substitutes
Rated players: 4 Rated Capacity: 27%
CEMENT INDUSTRY | STRUCTURE
Geographical Capcacity DivisionNorth 81%South 19%
Sr.# Company Cement (tons)
Market Share(Cement) Status Plant Location Regions
1 Bestway Cement Limited 5,915,250 13% Listed Chakwal, Hattar North2 PakCem Limited 2,485,445 5% Listed Chakwal North
3 Lucky Cement Limited 7,386,000 16% Listed Pezu and Karachi North/South
4 D.G.Khan Cement Limited 4,221,000 9% ListedDG Khan and
Chakwal North
5 Fauji Cement Company Limited 3,433,500 7% Listed Fateh Jang North6 Maple Leaf Cement Factory Limited 3,370,500 7% Listed Daudkhel North7 Dewan Cement Limited 2,898,000 6% Listed Hattar North/South8 Kohat Cement Company Limited 2,677,500 6% Listed Kohat North9 Gharibwal Cement Limited 2,110,500 5% Listed Jehlum North10 Pioneer Cement Limited 2,030,250 4% Listed Khushab North11 Cherat Cement Company Limited 1,102,500 2% Listed Nowshera North12 Askari Cement 2,677,500 6% Un-Listed Nizampur North13 Attock Cement Pakistan 1,795,500 4% Listed Hub, Lasbela South14 Flying Cement Limited 1,197,000 3% Listed Lilla North
15 Power Cement Limited 945,000 2% Listed Nooriabad, Dadu South
16 Fecto Cement Limited 819,000 2% Listed Sangjani North17 Dandot Cement Limited 504,000 1% Listed Jehlum North18 Thatta Cement Limited 488,250 1% Listed Thatta South
Total 46,056,695 100%
Cement Industry | Production and Consumption Trend
Capacity Increase: FY17: Commissioning of Cherat Cement Plant FY19: Commissioning of Attock Cement and DG Khan Cement Plants
Cement Industry | Local – Export Mix
Cement Industry | Demand Drivers
Government inclination towards infrastructure spending CPEC Infrastructure projects US$ ~12bln Energy projects US$ ~34bln
Industry Dynamics
Supply Surplus
Supply
Demand
*Projected
Dynamics changing | Excess capacity cushion squeezing
Industry Lifecycle
Time
Sale
s in
PKR
or V
olum
es
With expected rise in demand | Growth would intensify Expansions announced
Cement Industry | Performance
KSE-100 CementFY15 16% 35%1HFY15 8% 25%
Retrun
Cement Industry | Performance
Cement Industry | Pricing
Cement Industry | Efficiency
• Coal Exporting Countries | Low • Power Suppliers | High
Bargaining power of Suppliers
• Government | Medium • Private | Price takers Low
Bargaining power of
Customers
• No substitute available | Low Threat of Substitute Products
• Heavy CAPEX requirements | Low • Expansion – Existing players Medium
Threat of New Entrants / Expansion
• Price and Production arrangement | Low Intensity of
Competetive Rivalry
Cement Industry | Financial Structure
Cement Industry | Upcoming Expansions
Cherat Cement: Plant Capacity: 1.3mln tons p.a. Plant Technology: Chinese Estimated Cost: US$ 100mln Plant Location: Nowshera (North) Expected CoD: 2QFY17 [Jan.17]
Attock Cement: Plant Capacity: 1.2mln tons p.a. Plant Technology: Chinese Estimated Cost: US$ 120mln Plant Location: Lasbela (South) Expected CoD: 3QFY19
DG Khan Cement: Plant Capacity: 2.5mln tons p.a. Plant Technology: Danish (FLSmidth) Estimated Cost: US$ 300mln Plant Location: HUB (South) Expected CoD: FY19
Sector Outlook | Positive
Key Challenges Threat of Iranian Cement to our North Exports
Quantum of growth – due to delay in CPEC and Govt.
Conclusion
Strong Local Demand Fundamentals
Price Arrangement Expected to Continue
Analysts
Saira Rizwan Assistant Manager - Ratings [email protected]
Umer Farooq Financial Analyst [email protected]
Miqdad Haider Financial Analyst [email protected]
Contact Number: +92 42 3586 9504
DISCLAIMER PACRA has used due care in preparation of this document. Our information has been obtained from sources we consider to be reliable but its accuracy or completeness is not guaranteed. The information in this document may be copied or otherwise reproduced, in whole or in part, provided the source is duly acknowledged. The presentation should not be relied upon as professional advice.