The Pakistan Cement Industry

Sector Snapshot
22nd January 2019
Sector Snapshot: Global Context Pakistan Investment Briefing

 Global demand likely to be stable in the next 3-5 years with higher growth in emerging markets
offsetting some decline in China

 Growth in 2019 is forecast at 1.5% (volume decline of 0.5% in 2018 and 1% growth in 2017)*

 Emerging markets account for over 90% of demand (increase from 60% share in the mid 1980s).
China and India are the largest markets, with China accounting for approximately two thirds of
global consumption

 New capacity addition in China has declined significantly from its a peak in 2009/10

 India is expected to see strong single digit growth

 Leading global players include LafargeHolcim, CRH, HeidelbergCement and Cemex

Source: *World Cement Association

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Sector Snapshot: Cement industry Pakistan Investment Briefing

Strong growth prospects driven by domestic demand (e.g. infrastructure and housing investment). Export potential from UAE,
Afghanistan and India

Key Observations Installed capacity of leading players (2017/18)

 Production capacity of approx. 56 million tonnes (expected to increase to 75
million tonnes by 2021) Company Capacity (tonnes)
Askari Cement Ltd 2,677,500
 Northern region accounts for three quarters of capacity (the remainder is in the
Southern region) Attock Cement Pakistan 2,995,500
Bestway Cement Ltd 9,852,750
 Relatively fragmented market with approx. 17 players
Cherat Cement Company Ltd 2,425,500
 Leading players include Bestway Cement, Lucky Cement, Kohat Cement and
Dandot Cement Ltd 504,000
Maple Leaf
Dewan Hattar Cement Ltd 1,134,000
 Demand will be supported by:
Dewan Cement Ltd 1,764,000
 CPEC project; D.G.Khan Cement Ltd 7,119,000
 Key policy objective of new government is to build low cost housing units Fauji Cement Company Ltd 3,433,500
(5 million plus units); Fecto Cement Ltd 819,000
 Limited export potential with India (1.2 m tonnes in 2017/18) and Afghanistan Flying Cement Ltd 1,197,000
(1.8 m tonnes) ; increased competition from low cost Iranian cement; Gharibwal Cement Ltd 2,110,500
 Total exports have declined from a peak in 2008/09 of 10.7 m tonnes to 4.7 Kohat Cement Company Ltd 2,677,500
million tonnes in 2017/18. Lucky Cement Ltd 8,686,000
 Profitability has declined because of PKR depreciation and increasing input Maple Leaf Cement Factory Ltd 3,370,500
prices (especially coal) Pioneer Cement Ltd 2,030,250
 Prices expected to be around PKR 575 - 600 / bag in 2019 Power Cement Ltd 945,000
 Share price performance of cement companies has been poor with most Thatta Cement Ltd 48,825
recording double digit declines in the last twelve months Total 53,790,325
 Recent developments:
 Peshawar High Court has temporarily stopped the utility firm, Sui
Northern Gas Pipeline from not increasing the tariffs it charges Lucky
Cement Ltd. The Oil and Gas Regulatory Authority (OGRA) had notified
companies to increase gas tariffs by 142% following a recommendation
by the Economic Coordination Council.

Source: APCMA 3
Sector Snapshot: Cement industry Pakistan Investment Briefing

Strong domestic demand has compensated for falling exports

Production capacity and % utilisation rates Exports by volume and destination

12,000,000
60 100.00%
Production Capacity (mn tonnes)

90.00% 10,000,000
50
80.00%

% Capacity Utilisation
70.00% 8,000,000
40

tonnes
60.00%
6,000,000
30 50.00%
40.00%
20 4,000,000
30.00%
20.00%
10 2,000,000
10.00%
0 0.00% -

Capacity % Capacity Utilisation Afghanistan India Other

 Industry capacity is likely to increase substantially in the medium term to  After a long period of decline, there is some evidence that cement
meet demand from expected infrastructure and housing projects. exports are picking up (9.25% growth in the year to July 2018)

Source: APCMA Source: APCMA, 2018-19 data is for five months only

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Sector Snapshot: Cement industry Pakistan Investment Briefing

The sector is relatively fragmented with no player accounting for more than 15% of capacity. Share price performance in 2018

Share price performance (1

Company Financials Metrics Ownership
year)

y/e June 2018 Bestway (Holdings) Ltd (UK)

y/e June 2018
Bestway Cement Cement: 8.56 mn tonnes Zameer Choudrey and Pervez family -19.77%
Net sales: PKR 51.6 billion
Clinker: 8.07 mn tonnes (UK) main shareholders

y/e June 2018 Listed (KSE)

y/e June 2018
D G Cement Cement: 4.85 mn tonnes Government is a minority -40.44%
Net sales: PKR 30.67 billion
Clinker: 4.4 mn tonnes shareholder

y/e June 2018

y/e June 2018 Listed (KSE)
Lucky Cement Cement: 7.655 mn tonnes -19.28%
Net sales: PKR 45.89 billion Yunus Brothers Group
Clinker: 161 tonnes

y/e June 2018

y/e June 2018 Listed (KSE)
Attock Cement Cement: 2.30 mn tonnes -39.33%
Net sales: PKR 16.88 billion Pharaon Investment Group (84%)
Clinker: 2.48 mn tonnes

y/e June 2018

y/e June 2018 Listed (KSE)
Maple Leaf Cement Cement: 3.7 mn tonnes -42.65%
Net sales: PKR 25.68 billion Saigol Group
Clinker: 3.5 mn tonnes

y/e June 2018

y/e June 2018 Listed (KSE)
Fauji Cement Cement: 3.39 mn tonnes -21.25%
Net sales: PKR 21.16 billion Fauji Foundation
Clinker: 2.7 mn tonnes

Source: PSE, Company data, share price data from 14th January 2019

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 About Cornhill Strategy
Cornhill Strategy is a strategic advisory and business intelligence firm, with significant experience of undertaking advisory and
research assignments across the South Asia region. We work with clients in areas such as market entry strategy, acquisition
search, commercial due diligence and competitor intelligence.

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