AKD Securities Limited — South African Anti Dumping Duty

Karachi, May 15, 2015 (PPI-OT): As per news sources and discussions with management of different companies, South African Revenue Service has imposed an anti dumping duty on every Pakistani cement manufacturer ranging from 14%-77%.

In this regard, Bestway cement has been charged the highest duty level of 77.2% while Lucky Cement is to be charged at the lowest duty level of 14.3%. Presently the duty is effective for 6 months, during which players can raise their individual cases, after which the duty would be fixed for 5 years.

Within the Pakistan cement industry, Lucky Cement and Attock Cement are the companies that dispatch the highest quantities to the South African market.

Lucky Cement is the largest Pakistani cement exporter to the South African market (~650k tpa). Assuming the worst case scenario (no cement exports to SA market), AKD Securities Limited expects earnings to taper off by ~8.5% on FY15F earnings (EPS impact: PkR3.30). However, AKD Securities Limited believes LUCK’s cost efficient production will serve to mitigate the negative impact to some extent.

Attock Cement, however, seems to be the worst hit on account of this development. ACPL dispatches ~275k tpa cement to the South African market, where imposition of a 63.5% duty is expected to lower annualized earnings by PkR1.85/sh (8.7% of 9MFY15 annualised earnings).