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Pakistan Cement: Dispatches to fall 12% YoY during Feb 2019; Local down 19% YoY, Exports up 69% YoY

• In Feb 2019, Pakistan cement industry dispatches are expected to settle at 3.3mn tons, down 12% YoY. This will be the lowest monthly dispatches for the industry in past 8 months. On monthly basis, sales will be down 9% due to fewer number of days in February.
• Lower dispatches will be on the back of weak local demand as cold weather and slowdown in economy continue to hamper construction activities. Consequently, local sales are expected to fall by up to 19% YoY to 2.8mn tons (-8% MoM). To note, election year led to robust local demand in Feb 2018.
• We expect exports to remain above 500k levels in Feb 2019 with YoY growth of more than 50% where clinker sales to regional countries will remain dominant. Though MoM basis, sales will be lower by 13% on the back of decline in sales to India (India slapped 200% customs duty on goods imported from Pakistan, after the Pulwama incident on Feb 14, 2019) and fewer number of days.
• In 8MFY19, total sales are expected to remain almost flat at 30mn tons. Local sales, however, will decline by 5% owing to lower aggregate demand, in line with our expectations.
• This slowdown will likely limit any upside in local cement demand for the remaining period of FY19, we believe. As a result, we anticipate local cement consumption for FY19 at 39-40mn tons, down 3-5% YoY while exports are expected to settle at 6.7mn tons, up over 40% YoY. This will take capacity utilization of the industry to 82% (vs. 93% in FY18), lowest in last 4 years.