LAHORE  -    The overall profitability of cement manufacturers is expected to shrink by 24 percent in 3QFY19 to Rs.5.09 billion on quarterly basis mainly due to increase in input cost and drop in sales’ growth.

Industry experts said that the profit after taxation of the cement manufacturers had also declined enormously in first and second quarters, ranging from 15 percent to 80 percent, as compared to same periods of previous years.

Profitability of the cement industry was continuously declining for the last few quarters and the situation keeps on worsening amid increase in input cost and heavy duties and taxes on cement consumption, they added.

According to the data, during 3QFY19, cement sector underperformed the index by 7 percent due to mixed developments in key driving factors. On the one hand, additional supply of 2.1 million tons of cement by some new plants during low demand period also led to the increased pricing pressure in the market. An expert in the cement industry said that despite increase in input cost, the manufacturers have absorbed most of it to not hurt the construction activities, however, it had badly affected their profitability in third quarter of this financial year.

Despite that the industry is contributing significantly to the government revenues and contributed more than Rs. 115 billion in duties and taxes during FY2017-18. It is to be noted that DG Khan Cement suffered the most with its PAT going down to Rs. 417.82 million in 1Q, as compared to Rs. 2.83 billion during the same period of last year, an enormous decline of 80 percent.

Among bigger players, Bestway Cement had managed to earn PAT of 2.26 billion rupees in 1Q, however it was 25 percent less than almost Rs 3 billion they earned in same period of previous year. Lucky Cement’s PAT dropped from Rs. 3.01 billion in 1QFY17 to Rs. 2.48 billion in same period this year, depicting a 17 percent decrease.

Cement exports have been increasing this year, however, decrease in local demand is putting pressure on the industry. If the government supports the industry by decreasing duties and taxes, the local demand may increase with decrease in cement prices, boosting the construction sector and earning opportunities for workers associated with the sector, the experts added.

The most worrying aspect for the cement industry is the continued slump in the Northern region of the country where local dispatches have declined by over 10 percent in last nine months.

Experts said that the industry might face shortage of transport both for domestic and export dispatches due to the law on axle load restriction. They appealed the government to relax the axle load limitations and give a viable deadline to the transporters to add more fleet.

The cement industry has been under pressure this fiscal as development expenditure has been slashed by 40 percent from last year, however, we were pinning hopes on announcement of program to build 5 million low cost houses in next 5 years for the homeless but that project is yet to start, they said adding that government should start the project as soon as possible.