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Pakistan Cement: Dispatches to fall 14% YoY during Mar 2019

• In Mar 2019, Pakistan cement industry dispatches are expected to post second highest monthly cement consumption of 4mn tons (capacity utilization 87%), as per channel checks. Last time cement consumption crossed 4mn tons was in Oct 2018. However, cement dispatches will be down 14% YoY (+21% MoM).
• Local consumption is expected to settle at 3.5mn tons, down 17% YoY (+26% MoM). To note, last year was exceptionally robust due to election year where local dispatches in Mar 2018 clocked in at record 4.3mn tons.
• While Feb 2019 had fewer number of days, local cement dispatches during the outgoing month are better than expectations as the Govt. released stuck up funds for construction projects.
• We expect monthly exports to settle below 500k tons level for the first time in 9MFY19. While YoY exports growth will be over 20%, dispatches on MoM basis will fall mainly due to no or reduced dispatches to India. This was on the 200% customs duty imposed by India on goods imported from Pakistan, post Pulwama incident on Feb 14, 2019.
• In 9MFY19, total sales are expected to remain almost flat at 34mn tons. Local sales, however, will be down 7% owing to lower aggregate demand, in line with our expectations.
• We anticipate local cement consumption for FY19 at 39-40mn tons, down 4-6% YoY while exports are expected to settle at 6.7mn tons, up over 40% YoY. This will take capacity utilization of the industry to 81% (vs. 93% in FY18), lowest in last 4 years.