Cement industry faces huge losses in last 9 months
ISLAMABAD: The cement manufacturing units have faced huge losses as in the third quarter the sector average profitability (after taxation) has declined by 123 percent from a profit of Rs 8.50 billion to a loss of Rs 1.97 billion, while in nine months period, the profitability has declined by 106 percent from a profit of Rs 27.6 billion to a loss of Rs 1.56 billion.
According to the data, the seven cement companies including Attock Cement, Bestway Cement, DG Khan Cement, Fauji Cement, Kohat Cement, Lucky Cement and Maple Leaf Cement have declared losses in the third quarter of the ongoing fiscal year. The five north based plants incurred gross loss in the third quarter and unable to recover the production cost.
In third quarter, the units posted losses as Bestway cement, Rs 441 million, DG Khan cement, Rs 1.003 billion, Fauji cement, Rs 210 million, Kohat cement, Rs 381 million, Maple Leaf cement, Rs 1.281 billion. However, the Attock cement and Lucky cement earned a profit of Rs 353 million and Rs 999 million, respectively, which is 37 and 64 percent lower than Rs 559 million and Rs 2.793 billion earned respectively in the corresponding period of last fiscal year.
Suspension of trade to India has given another below to the cement sector as the cement export to India ended since the Pulwama attack in February 2019. Further, in August 2019, Pakistan also suspended the bilateral trade with India. During this period cement exported to the India was suspended which also added into the losses of the industry.
Earlier, Pakistan was monthly exporting on average 75000 tons of cement to India.
On the other hand in the backdrop of construction activities started after China-Pakistan Economic Corridor (CPEC) projects, the cement industry increase their production capacity in the country anticipating growing demands. The production capacity of cement sector has increased from 44 million tons in 2014 to 69 million tons.
However, the decision of increase in production capacity backfired due to poor economic policies of the government which resulted in the increase of the cement industry debts from Rs 62 billion in June 2014 to Rs 180 billion in June 2019.
Now the industry is expecting that commencement of work on mega projects and housing schemes announced by the government will bode well for the cement manufacturers and other construction industry.
Further, the government only facilitated the builders and property dealers by reducing duties and taxes on land transfers in Prime Minister Construction Industry relief package while nothing was announced for the other construction sectors including cement manufactures.
However, the cement industry has welcomed the package as they believe that resumption of the construction industry will ultimately increase the cement consumption, create employment and generate the economic activities in the country. TLTP