Fauji Cement Company Ltd (FCCL), Pakistan, posted earnings of PKR2.4bn (USD16.99m), up by 15 per cent YoY for the nine months ended March 31 in FY2019.
Net sales declined by 1.07 per cent to PKR15.64bn, from PKR15.81bn, primarily owing to drop in local dispatches.
Over the period, distribution costs fell by 4 per cent to PKR183m, but administration expenses increased by 8 per cent to PKR 295m.
In 1HFY19, cement production and dispatches for Fauji Cement (PSX: FCCL) were down while clinker production and revenues were up. Three months on, the company’s revenues are under pressure likely owning to continue downward off take in local markets, and a higher share of low-priced exports. Fauji however is showing a growth in margins that is unthought-of in this industry. With a depreciating rupee and high input cost scenario, given it faces heavy competition in the north zone, Fauji’s margin growth from 24 percent to 27 percent in 9M is well-acknowledged.
Compare Fauji’s financials to Attock’s that saw its margins drop to 22 percent in 9M from 31 percent despite a 36 percent increase in revenues, the advantage of having better domestic prices, and proximity to the ports. Fauji’s higher margins are a function of operating its second production line to the maximum and comparatively higher retention prices in the first two quarters. In the third quarter, margins had actually dropped due to lower cement prices per bag and higher costs compared to the period last year.
Though imported coal costs have been higher during the period, Fauji seems to have managed its inventory well. Coal prices in the international market averaged $94 per ton in the 9MFY19, against $91 per ton during 9MFY18. However, on the upside, between Jul-18 and Mar-19, coal prices slid by 35 percent landing at $78.8 per ton in Mar-19 against $106 in July. The rupee also depreciated by 13 percent between July-18 and Mar-19.
Meanwhile, other income including income from deposits and the sale of property, plant and equipment was 4 percent of before tax profits, against 2 percent this period last year. Indirect expenses as a share of revenue has remained 5 percent which are generally lower from players in the south that have high distribution costs due to higher exports share. Finance costs have also become negligible.
Despite a somber third quarter, Fauji is set to experience positive growth during FY19 (up 15% in 9M), which is not something that can be said for most cement players in the north and the south zone. After tough two year run with one of its plant shutting down and the company having to produce cement with expensive clinker it bought from neighbours, this break for Fauji is well-deserved.
Copyright Business Recorder, 2019
Pakistan: Cement exporters based in Pakistan have urged the Ministry of Commerce to approach South African authorities with the aim of overturning the existing anti-dumping duty on Pakistani cement.
“Before anti-dumping duty, annual cement exports to South Africa were worth US$700m. Now it has gone down to US$100m,” said Mohammad Rafiq Memon, Chairman of the Pakistan-South Africa Business Forum (PSABF). He said that the forum was trying its best to get this issue resolved and that Pakistan’s Ministry of Commerce should send a delegation to South Africa to convince the authorities to review the duty. He added that he was optimistic that South Africa would review the anti-dumping duty on cement imports and said that the situation was likely to improve by 2020.
He said that PSABF also has plans to establish a trade centre in South Africa by the end of December 2019, at which Pakistani manufacturers and exporters would be able to display samples of their products and services, along with relevant contact information. This would result in effectively promoting Pakistani products, not only in the South African market, but in other African states.
ISLAMABAD: The Khyber Pakhtunkhwa government is falling behind in the implementation of the Khyber Pass Economic Corridor Project, for which the World Bank approved a loan of $460.6 million almost a year ago.
A recently released report on the project states, “the project is pending effectiveness as the government’s internal approval was underway, and expected to be completed soon, hence physical activities have not commenced.”
The objective of the project is to expand economic activity between Pakistan and Afghanistan by improving regional connectivity and promoting private sector development along the Khyber Pass corridor.ARTICLE CONTINUES AFTER AD
Infrastructure deficiencies restrict cross-border trade between Pakistan and Afghanistan. At the border crossing, inadequate infrastructure and the need to exchange lanes creates bottlenecks that further slow cross-border traffic. Expensive informal levies assessed on the existing road by local and national agents further increase the costs of transiting the Khyber Pass.
The roadway between Peshawar and Kabul through the Khyber Pass represents a section of corridors five and six of the Central Asia Regional Economic Cooperation (CAREC) and has served as the key node in trade between South and Central Asia for hundreds of years.
Corridor five has potential to provide the shortest link between the landlocked countries of Afghanistan, Tajikistan and Uzbekistan, and the Arabian Sea while corridor six provides access to Europe, the Middle East and Russia. Improvements in transport connectivity are a key driver of regional economic cooperation among CAREC countries, World Bank says.
Despite strong demand for Pakistani products such as surgical instruments, textiles, fruits, rice, sugar, and cement and a market of nearly 70 million people, trade between Pakistan and the Central Asian Republics (CARs) is minimal, with Pakistan’s exports over the past couple of years making up less than one percent of total imports by the CARs. While trade between Afghanistan and Pakistan nearly doubled in the decade up to 2015, flows dropped by about 30 per cent over the past two years.
The ongoing development of the China-Pakistan Economic Corridor (CPEC) is designed to upgrade the infrastructure linking major cities in Pakistan to western China and the Indian Ocean. The National Highway Authority (NHA) is also developing a connectivity programme that will link Afghanistan to CPEC via border crossings at Chaman and Torkham.
The legal framework for reviving trade among Afghanistan, Pakistan, and Central Asia is in place and is developing. Pakistan’s provision of transit trade facilities to Afghanistan was first formalised under the Afghanistan Transit Trade Agreement (ATTA) signed in 1965. The agreement was enhanced in 2010, with the Afghanistan Pakistan Transit Trade Agreement (APTTA) providing reciprocal transit trade privileges to Pakistan to enter the Central Asia markets and Iran via Afghanistan.
Recently, Tajikistan has requested to be part of a trilateral transit trade agreement; a draft agreement has been prepared, to which Pakistan has consented. The Kyrgyz Republic and Turkmenistan have also indicated their interest in being part of the agreement.
Published in Dawn, April 19th, 2019
KARACHI: Pakistan’s cement exports to South Africa have suffered in the last couple of years because of anti-dumping duty imposed by the South African government.
“This has resulted in a reduction in cement exports to around $100-150 million from $700 million prior to imposition of the duty,” said Pakistan-South Africa Business Forum (PSABF) Chairman Mohammad Rafiq Memon.
Speaking at the Karachi Chamber of Commerce and Industry (KCCI) on Wednesday, he said, “We are trying to get this issue resolved but Pakistan’s Ministry of Commerce also has to send a delegation to South Africa in order to persuade the authorities to review and waive the anti-dumping duty on cement.”
Memon revealed that the PSABF planned to organise a four-day seminar in July 2019, which would be followed by a single-country exhibition in October to highlight Pakistan’s trade potential. “These events will provide a perfect opportunity to industrialists to introduce their products in South Africa.”
Published in The Express Tribune, April 18th, 2019.
Iran/Afghanistan: Exports of cement from Iran to Afghanistan have increased following the resumption of US-led sanctions on Iran. Speaking on Afghanistan’s Tolo News TV, Janagha Navid, the spokesman of Afghanistan’s Chamber of Commerce and Industries, said that Afghanistan imports 80,000t/yr of cement, while stressing that the country’s domestic cement production capacity could increase to 420,000t/yr.
Navid added that cement imports from Pakistan had decreased, while imports from Iran had risen, due to depreciation of the Iranian Rial against foreign currencies. He further highlighted that Afghan customers prefer Iranian cement over Pakistani cement, citing quality considerations. In 2018, Iran exported US$127m-worth of cement to Afghanistan, broadly similar to imports from Pakistan, which came to US$132m.
Published by Global cement
