PPI Original Text (PPI-OT) – FED on cements reduced by only PkR 100/ton – Alfalah Securities Limited

Karachi, May 31, 2012 (PPI-OT): The government has turned down the request of All Pakistan Cement Manufacturers Association (APCMA) to cut Federal Excise Duty (FED) on cements by up to PkR 250 per ton and has reduced it by only PkR 100 per ton, thereby fixing the applicable FED at PkR 400 per ton in Budget FY13.

According to Alfalah Securities Limited, in previous year’s budget, the government had reduced FED on cements from Pars s700 per ton to Pars 500 per ton (a reduction of Pars 200 per ton) however, cement manufacturers instead of passing on the benefit to consumers raised cement prices. Hence, the government has decided to phase out FED on cements in the next couple of years, wherein a reduction of PkRs 100/ton is justified for the time being.

Cement manufacturers have been enjoying the benefits of high cement prices and favourable demand, wherein the opening of trade routes to India would further help manufacturers to operate their plants at an optimum capacity owing to huge demand of cements in India. Alfalah Securities Limited believes that high cement prices and international coal prices being on the lower side (currently hovering at USD 98/ton) would result in increased profitability for cement manufacturers as both local and export sales are expected to increase owing to opening of Wagah border and measures being taken by the government to build development projects ahead of the general elections in 2013. Alfalah Securities Limited recommends a “Hold” on LUCK at current levels.