cementing knowledgecementing knowledge - pacra · 2014-03-19 · lucky cement – the ldileading...

Cementing KnowledgeCementing Knowledge

January 2014

SnapshotW ld C t I d tWorld Cement Industryi. Capacity, production and utilizationii. Consumption – region wisep giii. Top Producers and Consumersiv. Cement Tradev Per Capita Cement Consumptionv. Per Capita Cement Consumption

Pakistan’s Cement Industryi Cement Playersi. Cement Playersii. Geographical Distributioniii. Demand Driver

PerformanceFinancial StructureOutlook

World Cement Industry


Pakistan’s Cement Industry

Performance Financial Structure Outlook

1

Capacity and Production

120%

140%

160%

3,000

3,500

4,000

80%

100%

2,000

2,500

Mln

Ton

sCapacity

20%

40%

60%

500

1,000

1,500

M

Production

Capacity Utilization (%)

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Capacity 1,995 2,058 2,205 2,310 2,520 2,835 2,520 3,045 3,255 3,465 3,570 Production 1,800 1,950 2,130 2,310 2,550 2,770 2,840 3,060 3,310 3,600 3,700

0%0

Utilization (%)

Rise in capacity and improved utilizationChina Brazil and Germany operating at more than 100% capacity

Capacity Utilization (%) 90.2% 94.8% 96.6% 100.0% 101.2% 97.7% 112.7% 100.5% 101.7% 103.9% 103.6%




China, Brazil, and Germany – operating at more than 100% capacity

2, 3

Region wise consumption - 2011 Region wise consumption - 2012

5%

4%3% 3% 1%

g p

North Asia

Indian Sub-Continent5%

4%3%

3% 1%

g p

North Asia

Indian Sub-Continent

6%

Middle East

South Asia

Western Europe

6%

Middle East

South Asia

Western Europe

5%

5% Africa

South & Central America5%

5% Africa

South & Central America

C l & E E

60%8%

5%Central & Eastern Europe

North America

Australasia 60%

8%

Central & Eastern Europe

North America

Australasia

Asia - the largest cement consumer of the world (~ 78%)




Asia the largest cement consumer of the world ( 78%)

2, 3

2,150 2,000

2,500

Top 20 producers and respective share in world production - 2012

250 74 70 65 65 60 60 52 49 44 43 36 34 33 32 32 31 20

500

58.1%

6.8% 2.0% 1.9% 1.8% 1.8% 1.6% 1.6% 1.4% 1.3% 1.2% 1.2% 1.0% 0.9% 0.9% 0.9% 0.9% 0.8% 0.5%

13.5%

-

500

1,000

1,500

2,000 M

ln T

ons

-

T 20 d d ti h i ld d ti 20112,100

58.9%

13 2%

1,500

2,000

2,500

n To

ns

Top 20 producers and respective share in world production - 2011

210 69 64 63 61 59 56 51 48 48 44 37 35 34 33 32 30 22

470 5.9% 1.9% 1.8% 1.8% 1.7% 1.7% 1.6% 1.4% 1.4% 1.4% 1.2% 1.0% 1.0% 0.9% 0.9% 0.9% 0.8% 0.6%

13.2%

-

500

1,000 Mln

China – the largest cement producer (58% share in the world’s capacity)Pakistan 17th largest prod cer




Pakistan – 17th largest producer

2, 3

2,160

2,000

2,500 Top 15 Cement Consumers - 2012

616

58.4%

6 5%

16.6%1,000

1,500

Mln T

ons

242 79 69 63 59 58 55 53 51 46 44 43 35 27

6.5%

2.1% 1.9% 1.7% 1.6% 1.6% 1.5% 1.4% 1.4% 1.2% 1.2% 1.2% 0.9% 0.7%

-

500

2,048 2,000

2,500 Top 15 Cement Consumers - 2011

222 72 65 8

641

57.4%

6.2%2.0% 1.8% 1.6% 1.6% 1.6% 1.4% 1.4% 1.3% 1.3% 1.3% 1.2% 1.0% 0.9%

18.0%

500

1,000

1,500

Mln T

ons

Difference in consumption and production leading to import/export of cement

72 65 58 56 56 50 49 48 47 46 42 34 33 -




Difference in consumption and production – leading to import/export of cement

343

300

350

400Top Cement Companies - 2012 2, 3

223 218 209

11496

8165 58

100

150

200

250Ml

n Ton

s

65 58 54 45 38 35 31 23

0

50

China National Building Material Company Limited – operating solely in China –became the largest cement producer in 2012Lafarge – the largest multinational cement producerRelatively lower international ratings

Company RatingHolcim BBBLafarge BB+Heidelberg Cement Ba1




Heidelberg Cement Ba1

Top Importers and Exporters - 2012 3

Consumption Pattern Trade Domestic

Total 148mln tons were traded in 2012 (4% of the world production)Top 10 exporting countries (70% share)T 10 i ti t i (40% h )

Consumption Pattern Domestic

Top 10 importing countries (40% share)




Per Capita Cement Consumption - 2012

3

1,683 1,581

1,400

1,600

1,800 Per Capita Cement Consumption 2012

911

770 744 616 560 554 546

800

1,000

1,200

Kg

560 554 546 524 498 489 438 402 367 342 330 329 327 300 232 202 191

129 108 200

400

600 527

-

Per Capita Cement Consumption Average

Cement consumption varies because of different construction patterns




18 companies

4

18 companies –24 plantsLucky Cement

h l di– the leadingplayer in themarketThe top 5companies’concentrationratio (~55%)shows thatmarket power ismarket power islimited to a fewleadingcompaniescompanies.




Part of KSE 100 index

4

Majority(19) plants

l t dare locatedin Northregion with83% sharein theinstalledinstalledcapacity




Performance




5

7.0%600Market Capitalization

4.6%

5.8%

400

500

2.3%

3.5%

200

300

0.0%

1.2%

0

100

11 1 11 11 11 11 12 12 12 12 12 12 12 2 12 12 12 12 13 13 13 13 13 13 13 3 13 13 13 13

Jul-1

Aug

-1Se

p-1

Oct

-1N

ov-1

Dec

-1Ja

n-1

Feb-

1M

ar-1

Apr

-1M

ay-1

Jun-

1Ju

l-1A

ug-1

Sep-

1O

ct-1

Nov

-1D

ec-1

Jan-

1Fe

b-1

Mar

-1A

pr-1

May

-1Ju

n-1

Jul-1

Aug

-1Se

p-1

Oct

-1N

ov-1

Dec

-1

% Share of Cement M-Cap in KSE All Market Capitalisation

KSE All M-Cap Cement Sector M-Cap

Except Askari Cement, all other cement companies are listedOutperformed KSE market capitalization in the last two years owing to improvedbusiness dynamicsbusiness dynamics




4

90%

100%

45

50 Pakistan Cement - Production and Capacity Utilization

Closure of GharibWal and Javedan

60%

70%

80%

90%

30

35

40

45

30%

40%

50%

60%

15

20

25

30

Mln

Ton

s

0%

10%

20%

-

5

10

Cement Capacity (Mln Tons) Total Production (Mln Tons)

Export (Mln Tons) Capacity Utilization (%) C li l i tExport (Mln Tons) Capacity Utilization (%) Cyclical impact

Pakistan’s cement industry is regional, seasonal and cyclical.Lower capacity utilization (75%) than India (95%) and Iran (83%)




p y ( ) ( ) ( )

4

N i l h iNominal share inthe country’s totalexports

40%40Pakistan Cement and Clinker Exports

North regioncontributing morethan 70% in exports

25%

30%

35%

40%

25

30

35

40

pIncreased cementproduction (FY13:33 4mln tons;

15%

20%

25%

15

20

25M

ln T

ons

33.4mln tons;FY12: 32.5mlntons) with largelysustained share of

0%

5%

10%

0

5

10

FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 6MFY14sustained share ofexports (FY13:25%; FY12: 26%)

FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 6MFY14

Export from South Zone (Mln Tons)

Export from North Zone (Mln Tons)

Total Exports (Mln Tons)

Total Production (Mln Tons)

Share of Exports in Total Production (%)




4

100%12

Pakistan Cement Exports' Breakup

75%9

untr

y

ns

25%

50%

3

6

Shar

e of C

ou

Mln

Ton

0%0FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 6MFY14

Largely sustained exports in the last two years

Total Exports (Mln Tons) Afghanistan Via Land (%)

India Via Sea & Land (%) Cement & Clinker - Other Countries Via Sea (%)

g y p yAfghanistan - largest buyer of Pakistan’s cement (53%)Pakistan cement export constitute more than 75% of Afghanistan’scement importscement imports




4, 6

35525 Pakistan Cement Sector - Demand Driver

25

30

375

450

nsn

15

20

225

300

Mln

Ton

PK

R B

ln

5

10

75

150

0-FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13

Federal Public Sector Infrastructure Development Programme Spending (PKR Bln) Provincial Annual Infrastructure Development Programme Spending (PKR Bln) *

Pakistan’s local cement consumption has strong correlation withinfrastructure Development Programmes

Local Cement Consumption (Mln Tons) * Estimated as per infrastructure share in Federal PSDP




p g

4, 7

120%600 Cement Retail Prices Vs Capacity Utilization

80%

100%

400

500 Price war

60%

80%

300

400

PKR

/ ba

g

20%

40%

100

200

0%-

Sep-

07

Dec

-07

Mar

-08

Jun-

08

Sep-

08

Dec

-08

Mar

-09

Jun-

09

Sep-

09

Dec

-09

Mar

-10

Jun-

10

Sep-

10

Dec

-10

Mar

-11

Jun-

11

Sep-

11

Dec

-11

Mar

-12

Jun-

12

Sep-

12

Dec

-12

Mar

-13

Jun-

13

Sep-

13

Dec

-13

Capacity Utilization (%) Retail Prices (PKR/bag) Seasonal impact

Rainy season and winter affect the capacity utilization levelTermination of price war resulted in improved retail prices

Capacity Utilization (%) Retail Prices (PKR/bag)Source: PBS, APCMA

Seasonal impact

Termination of price war resulted in improved retail pricesWorld Cement

IndustryPakistan’s

Cement Industry


Volatile

5

80

100

120Average Coal Price

Volatile business dynamics

20

40

60

80

(USD

/Ton

)Reduced cost of production 25%250

Pakistan Cement Sector - Revenue and Income

0FY08 FY09 FY10 FY11 FY12 FY13

productionIncreased sales 15%

20%

25%

150

200

250

n

Improved margins 5%

10%

50

100 PKR

Bln

-5%

0%

(50)

-FY08 FY09 FY10 FY11 FY12* FY13*

Revenue (PKR Bln) Net Income (PKR Bln) Net Margin (%)




* Does not include Askari Cement

Financial Structure




4

63%

70%

180

200

Pakistan Cement Sector - Capital Structure

49%

56%

63%

140

160

180

28%

35%

42%

80

100

120

PKR

Bln

7%

14%

21%

20

40

60

0%0FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12* FY13*

Debt (PKR Bln) Equity (PKR Bln) Debt / (Debt + Equity) (%)


S A C A & i ’ l

Improved capital structureReduced debt burden


Source: APCMA & cement companies’ annual accounts




Cement - Credit Behavior 8

Cement loans – reduced share but higher infection ratio than industryindustry




OutlookOutlook




Business Risk | Medium

Outlook | Stable to Positive

Local Demand | likely to sustain.Financial Profile | expected to improve due tofurther reduction in leveraging.




What Could Change the Outlook

Initiation of Price War | would negatively impact players’margins.margins.Rise in Energy Cost | owing to higher contribution ofenergy cost, significant rise in coal prices and/or upwardmovement in gas/electricity tariff would hurt margins.Instability in the export markets | with the availability ofl I i i P ki ’ bi klow-cost Iranian cement in Pakistan’s biggest export market– Afghanistan – sustainability in the price and demand forPakistani cement would be challenging.Pakistani cement would be challenging.




Bibliography1. USGS Minerals Information: Mineral Commodity Summaries |

http://minerals.usgs.gov/minerals/pubs/mcs/2. The cement industry in figures | http://www.ficem.org/pres/THOMAS-ARMSTRONG-LA-

INDUSTRIA-DEL-CEMENTO-EN-CIFRAS.pdfp3. An overview of global cement sector trends | http://www.ficem.org/boletines/ct-

2013/presentaciones2013/1-EXPERTOS/2_THOMAS-ARMSTRONG/ICR-FICEM-Presentation-Handout-30Aug13.pdf

4 All Pakistan Cement Manufacturer Association | www apcma com4. All Pakistan Cement Manufacturer Association | www.apcma.com5. Karachi Stock Exchange Limited6. Ministry for Planning, Development & Reforms | http://www.pc.gov.pk/?page_id=1239 Jj7. Pakistan Bureau of Statistics8. State Bank of Pakistan: Statistics of the Banking System | Quarterly editions

Analysts Rana M. Nadeemnadeem@pacra com

Aisha Khalidaisha@pacra com

M. Shahnawaz A. Khanzadashahnawaz aziz@pacra [email protected] [email protected] [email protected]

Contact Number: +92 42 3586 9504

DISCLAIMERSCPACRA has used due care in preparation of this document. Our information has been obtained fromsources we consider to be reliable but its accuracy or completeness is not guaranteed. The informationin this document may be copied or otherwise reproduced, in whole or in part, provided the source isd l k l d d Th t ti h ld t b li d f i l d iduly acknowledged. The presentation should not be relied upon as professional advice.

cementing knowledgecementing knowledge - pacra · 2014-03-19 · lucky cement – the ldileading...

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