AKD Quotidian about — Cement Dispatches Jan’14/7MFY14

Karachi, February 06, 2014 (PPI-OT): Cement dispatches for Jan14 increased by 2.6%YoY to clock In at 2.73mn tons.

According to AKD Securities, growth was largely led by a sharp 26.1%YoY increase in exports via sea resulting in an overall Increase in exports of 7.6%YoY to clock in at 563k tons. Growth In local dispatches on the other hand remained subdued, posting an increase oil .3%YoY to 2.l6mn tons. As a result, total 7MFY14 dispatches clocked in at 18.B6mn tons posting a tepid increase of l.3%YoY. Local dispatches grew by 2.1%YoY to 14.15mn tons while exports posted a decline of O.8%YoY to 4.71mn tons. Decline in exports to Afghanistan will likely continue to be a drag on dispatch growth where competition from Iranian cements and slow pace of progress on development projects in Afghanistan have been holding back growth. The declining proportion of sales to Afghanistan (YMFYI4 share of 48% vs. 7MY13 share of 56%) and a dip in exports post a potential US troop withdrawal may force manufacturers to look to the South for future expansions / consolidations.

Cement Dispatches

k tons      7MFYI4            YoY         Jan'14            MoM        YoY
Local        14,151           21%          2.163          -7.0%       1.3%
Exports       4,706         -0.8%            563         -10.0%       7.6%
Total        18,857          1.3%          2,726          -7.7%       2.6%

Jan’14/7MFYI4 dispatches: Cement dispatches fciJan’14 posted a growth of2.6%YoY to clock in at 2.73mn tons. Growth was largely led by a sharp 261%YoY increase in exports via sea off setting a 15%YoY decline exports to Afghanistan, resulting in an overall 7.6%YoY increase in exports to 563k tons. Growth in local dispatches on the other hand remained subdued posting an increase of I .3%YoY to 2.I6nin tons. Dispatches in 7MFYI4 increased to 18.B6mn tons, an increase of I .3%YoY. In this regard, local sales increased by2.I%YoYto 14.ISmn tons while exports posted a decline ofO.8%YoYto register sales of 4.7Imn tons. Afghanistan’s share in exports continues to be on a decline where 7MFYI4 dispatches came off by 14%YoY to 227mn tons.

Expansions In the South? Political uncertainty and competition from [ran are the primary factors affecting exports to Afghanistan. With question maths over the continued military presence of the US in Afghanistan, progress on NATO financed development projects has reportedly been slow, affecting exports to Afghanistan. Clarity is likely to emerge on the continued presence of the US after the Presidential elections in Afghanistan slated for Apr 514, where the incoming government will likely decide whether to allow US military bases within Afghanistan despite US pressure for an early decision on this, if the incoming government does not allow the US to maintain bases in Afghanistan, there may potentially be a significant decline in Western aid to the country. In such a scenario, AKD Securities believes cement manufacturers will push for removal of NTBs for exports to India and the larger cement manufacturers could look towards expansions in the South to gain easier access to export markets via sea.