Pakistan Economy Recovering: Car Sales Up 72%; Cement Sales Rise 16.89%

Pakistan auto industry is booming. Toyota, Suzuki and Honda factories are working around the clock in the southern port city of Karachi and eastern city of Lahore -- yet customers can still wait for up to four months for new vehicles to be delivered, according to media reports. At the same time, increased construction activity is visible everywhere in the country.

Local car sales, excluding imported cars, jumped to 54,812 units in the first three months (Jul-Sep) of fiscal year 2016, up 72% from 31,899 units in the same period of last year, according to data released by the Pakistan Automotive Manufacturers Association (PAMA).

Pak Suzuki led the pack with 33,770 units followed by Indus Motors (Toyota) 14,767 cars and Honda Motors 6,184 units. Industry analysts at Topline Securities expect local car sales to reach 203,653 units during the current fiscal year.

Car sales (excluding imported ones) in Pakistan grew at a five-year (FY11-15) compound annual growth rate (CAGR) of just 5.3% to 179,953 units. While volumes surged by 31% in fiscal year 2015 (FY15) on the back of the new model of Toyota Corolla, Punjab taxi scheme and an increase in car financing due to 42-year low interest rates in the country also helped, according to Express Tribune newspaper. “We forecast local car sales to grow at 13% in FY16 to reach 203,653 units,” Topline Securities reported on Monday.

In addition to car sales, domestic cement sales have also jumped by a phenomenal 16.89% to 4.29 million tons during July and August 2015 from 3.67 million tons shipped in the same period last year.

Car sales and construction activity are both believed to be driven by low interest rate financing available from banks and improved security situation across the country. With record low inflation, the State Bank of Pakistan (SBP), the nation's central bank, has cut discount rate to a 42-year low of 6%.

After its September meeting, the SBP said the rise in fixed investment financing in the energy generation and distribution, chemicals and services sectors signal possible increase in their productive activity in coming months. “The implementation of infrastructure development and energy projects under the China-Pakistan Economic Corridor (CPEC) will further enhance the improving investment environment. Therefore, there is anticipation of higher economic activity in 2015-16, which is expected to boost credit uptake,” it said.

Per Capita Cement Consumption Source: Global Cement

A dramatic decline in terrorist violence in the country since the launch of Pakistan Army's Operation Zarb-e-Azb and a big drop in international oil prices have helped drive economic recovery in the country in recent months.

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The Role of Cement Industry in Economic Development of Pakistan

Views: 1488

Comment by Riaz Haq on February 24, 2016 at 9:32am

#UAE expats drive up house prices in #Pakistan as #Dubai real estate values fall 15-20% http://www.khaleejtimes.com/business/real-estate/uae-expats-drive-u...

According to a Dubai ann­ual market update issued in mid-December, ave­rage residential property prices have fallen 16 per cent and 14 per cent year on year for apartments and villas, respectively, while overall unit transactions declined by 33 per cent.

A soft Dubai property market is encouraging Pakistan expatriates in the UAE to invest back home. This, in turn, is pushing up property prices in Pakistan, resulting in values almost doubling in some areas.

Higher demand, especially in Karachi and Islamabad, was driving prices higher on a daily basis, according to property brokers and developers quoted in a report that appeared on Dawn.com. In contrast, residential prices in Dubai have fallen by up to 15 to 20 per cent in recent months.

According to a Dubai ann­ual market update issued in mid-December, ave­rage residential property prices have fallen 16 per cent and 14 per cent year on year for apartments and villas, respectively, while overall unit transactions declined by 33 per cent.

"Ample liquidity for property investment is pushing prices up everywhere, particularly in Karachi and Islama­bad," said Ashraf Hameed, the director of property developer Value Housing.

He cited closer monitoring of the cross-border movement of money and improved law and order situation as reasons behind the uptrend. "We have no problem of law and order in Islamabad while the situation in Karachi has also improved significantly," he added.

M. Anwar, a private investor in Karachi, said: "Property prices in Dubai have dropped 15 to 20 per cent in commercial and semi-commercial areas, and five to 10 per cent in posh areas."

Pakistanis have been among the leading investors in the Dubai property sector. Most of them were businessmen, politicians, government officials and those who migrated to other countries and shifted their property to Dubai for better returns.

Comment by Riaz Haq on February 27, 2016 at 10:23pm

#Pakistan automobile industry booming with sales up 31% year over year - http://www.khaleejtimes.com/business/auto/pakistan-auto-industry-ri...

Pakistan's auto industry is enjoying a boom. All leading brands such as Suzuki, Toyota and Honda have reported high profits.

The biggest car producer - Suzuki - shot down the industry's production record growth of 31 per cent by upping its own output by 54 per cent in 2015. Suzuki maintained its leadership among the country's Big 3.

The sale of cars manufactured and assembled in Pakistan climbed to 179,953 units in 2015 from 136,888 units in 2014, the Ministry of Industries said.

What is pushing this car buying and production spree? The yen stays weak against the greenback, helping car assemblers to buy imported spare parts for cheap prices. Imported spares account for around 75 per cent of the equipment which goes into assembling cars. Commercial banks' interest rates are now the lowest in 42 years, making car financing cheapest in decade.

New car models are attracting buyers as Pakistanis enjoy a higher purchasing power. "The latest growth in the automobile sector confirms a rising per capita income in Pakistan, improved economics of the auto sector and overall recovery of the economy," said Tahir Saeed, a financial market researcher.

There is big scope of more investment inflows to expand production capacity as competition among car manufacturers increases.

Auto is perhaps the only industry which is doing well at a time when others - ranging from textiles to farm products - are hit hard by stagnating exports. Reduced foreign demand, difficulties related to the international oil price crash and energy shortages are key factors hitting other industries.

"The auto industry must now focus on enlarging output of its cars and export more units to countries in its neighbourhood. It should also tap new markets in Central Asia," Minister for Commerce Khurrm Dastgir said.

Suzuki has unveiled its operational and financial results for 2015. The company is jointly owned by Pakistan Automobile Corporation (Paco) and Suzuki Motor Corporation of Japan (SMC). SMC owns 73 per cent of the joint venture.

Paco said: "In January to September 2015, Suzuki tripled its pre-tax profit to Rs6.33 billion as compared to Rs2.18 billion in the like period of the previous year."

Toyota cars assembled by Indus Motors is moving up the ladder fast. Its report said: "Toyota sold 57,000 car in 2015 - a record in the company's history. We have exceeded production capacity which is usually 54,800 units a year." 

Comment by Riaz Haq on February 27, 2016 at 10:23pm

#Pakistan automobile industry booming with sales up 31% year over year - http://www.khaleejtimes.com/business/auto/pakistan-auto-industry-ri...

Pakistan's auto industry is enjoying a boom. All leading brands such as Suzuki, Toyota and Honda have reported high profits.

The biggest car producer - Suzuki - shot down the industry's production record growth of 31 per cent by upping its own output by 54 per cent in 2015. Suzuki maintained its leadership among the country's Big 3.

The sale of cars manufactured and assembled in Pakistan climbed to 179,953 units in 2015 from 136,888 units in 2014, the Ministry of Industries said.

What is pushing this car buying and production spree? The yen stays weak against the greenback, helping car assemblers to buy imported spare parts for cheap prices. Imported spares account for around 75 per cent of the equipment which goes into assembling cars. Commercial banks' interest rates are now the lowest in 42 years, making car financing cheapest in decade.

New car models are attracting buyers as Pakistanis enjoy a higher purchasing power. "The latest growth in the automobile sector confirms a rising per capita income in Pakistan, improved economics of the auto sector and overall recovery of the economy," said Tahir Saeed, a financial market researcher.

There is big scope of more investment inflows to expand production capacity as competition among car manufacturers increases.

Auto is perhaps the only industry which is doing well at a time when others - ranging from textiles to farm products - are hit hard by stagnating exports. Reduced foreign demand, difficulties related to the international oil price crash and energy shortages are key factors hitting other industries.

"The auto industry must now focus on enlarging output of its cars and export more units to countries in its neighbourhood. It should also tap new markets in Central Asia," Minister for Commerce Khurrm Dastgir said.

Suzuki has unveiled its operational and financial results for 2015. The company is jointly owned by Pakistan Automobile Corporation (Paco) and Suzuki Motor Corporation of Japan (SMC). SMC owns 73 per cent of the joint venture.

Paco said: "In January to September 2015, Suzuki tripled its pre-tax profit to Rs6.33 billion as compared to Rs2.18 billion in the like period of the previous year."

Toyota cars assembled by Indus Motors is moving up the ladder fast. Its report said: "Toyota sold 57,000 car in 2015 - a record in the company's history. We have exceeded production capacity which is usually 54,800 units a year." 

Comment by Riaz Haq on February 27, 2016 at 10:23pm

#Pakistan steel industry booming with production of 4 million tons to meet rising demand last year 

http://tribune.com.pk/story/1053741/local-economy-cpec-to-help-stee... …


The start of mega development schemes and power projects under the China-Pakistan Economic Corridor (CPEC) will boost the annual demand for steel products by more than 30% to 6 million tons from 4 million tons, said an industry representative.

Pakistan Steel Re-Rolling Mills Association (PSRMA) Vice Chairman Akhtar Saeed said that 475 steel making units (large and small size) were operating in the country and their annual production was around 4 million tons. The large units’ production share was around 1.2 million tons.

Saeed said that more incentives were needed to attract new investment to the steel industry in the country. “The government should come up with a new comprehensive and targeted policy for the important sector of steel and they should have a detailed consultation with PSRMA.

“As a result of the increasing demand, new steel units would be set up. Thus, more job opportunities would be created and the government would get more taxes. 

Comment by Riaz Haq on May 7, 2016 at 1:12pm

#Pakistan woos Renault-Nissan in push for #automobile #investments http://reut.rs/1XbdcQR via @Reuters

With the economy growing at its fastest pace in eight years, the local currency stable against the dollar and interest rates at their lowest in 42 years, Pakistani officials believe the country is once again on the radar of investors seeking to tap into a market of nearly 200 million people.

Officials are touting a new auto policy, skewed in favor of new entrants, that includes offering foreign car manufacturers lower duties as an incentive to set up plants in Pakistan or revive shuttered ones.

"We expect that there will be one or two foreign investors coming into Pakistan," said Miftah Ismail, chairman of Pakistan's Board of Investment, who has been talking to car makers about setting up assembly plants for the local market.

Ismail told Reuters he had held talks with Japan's Nissan (7201.T) and alliance partner Renault (RENA.PA) for "some time", and last month met Fiat (FCHA.MI) executives in Italy for the first time.

Previous discussions also involved Germany's Volkswagen.

"I hope some people will bite," he said.

A source close to Renault said Pakistan was under consideration for new production investment, along with other potential locations, but added that discussions were at a very early stage. In an e-mailed statement, the company said it had "no news to announce at this time".

Nissan chief spokesman Jonathan Adashek said: "Pakistan is certainly a market of interest for us at present", but added no final decision had been made.

Comment by Riaz Haq on May 11, 2016 at 12:34pm

#Pakistan #automobile sales reach 184,099 units in 10 months, up 29% in July-April 2015-16 period http://www.pakistantoday.com.pk/2016/05/12/business/car-sales-reach...

Owing to the lower interest rates in the banking sector, Pakistan’s local car assemblers Tuesday showed 29 per cent year-on-year growth in July-April 2015-16. The local vehicle sales stood at 184,099 units versus 142,814 units during the same period last year.

An analyst of a brokerage house said that the main reason behind the rising sales of cars is auto financing as well as overall improvement in the country’s economic situation. The interest rates are at a 42-year low and below six per cent. The banks, investment companies and others are providing auto financing to use their excess liquidity.

PAK SUZUKI MOTORS COMPANY:

Pak Suzuki Motor Company (PSMC) sales increased by 41 per cent year on year to 109,628 units during the last 10 months of 2015-16 primarily due to Punjab government’s taxi scheme.

Volumes decreased by 18 per cent YoY (1 per cent MoM) in April 2016 (second month after the completion of the Taxi Scheme) to 8,965 units primarily due to completion of Taxi Scheme.

INDUS MOTORS:

Indus Motors (INDU) sold 52,987 units during the last 10 months of 2015-16 versus 45,978 units during the same period of last year. In April 2016, sales fell 6 per cent YoY to 5,483 units. On MoM basis, sales declined 5 per cent due to fewer working days in April 2016 compared to March 2016.

It is important to note that delivery time for the new Corolla model is still hovering in the range of 2-4 months depending on the variant.

HONDA:

The Honda Company is going to launch its New Honda Civic model, which is expected to hit the market in the 2nd half of this year. Volumes of Honda Civic are expected to dry out in the coming months in anticipation of the new model launch in the 2nd half of 2016.

Honda Cars sold 21,293 units in the first 10 months of 2015-16 compared to 18,781 units during the same period of last year. In April 2016, Honda sold 2,751 units, up 16 per cent YoY (flat MoM).

The analyst said that Honda City remained the major contributor in this growth during the said period.

MILLAT TRACTORS (MTL) & AL GHAZI (AGTL):

Pakistan’s tractor segment posted a decline of 31 per cent YoY during July-April 2015-16 to reach at 26,586 units. This decline is because of the delay in the launch of provincial tractor subsidy scheme of 25,000 to 29,000 per tractor which was announced by Punjab and Sindh governments in the budget for the fiscal year 2015-16.

Millat tractors (MTL) and Al-Ghazi tractors (AGTL) both witnessed a decline in their sales volumes during the last ten months as farmers were waiting for the execution of announced subsidy schemes by Punjab and Sindh governments. Tractor manufacturers demanded of the governments to either execute or shelve the announced scheme so that farmers may resume their normal purchasing.

MTL sold 15,974 units in July-April 2015-16 compared to 23,426 units during the same period last year. The company’s sales decreased by 29 per cent YoY to 2,440 units in April 2016 (down 4 per cent MoM).

During the current fiscal year, AGTL witnessed a decline of 30 per cent YoY in sales to 9,882 units. The company sold 1,935 units in April 2016, up 23 per cent YoY (7 per cent MoM). Farmers seem to have resumed regular purchases due to uncertainty in the subsidy scheme.

Trucks and buses segment of Pakistan’s automobile sector has posted an increase of 42 per cent YoY to reach at 5,076 units during the first 10 months of FY16. This surge in demand is because of China-Pakistan Economic Corridor and improving law and order situation in the country, the analyst said.

Comment by Riaz Haq on May 11, 2016 at 12:37pm

: 13% YoY surge in sales boosts producers' profits

Pakistan's cement industry's profit rose 30 per cent to PKR45.169bn (US$431.6m) in the first nine months of the current fiscal year as there was a surge in sales, supported by soft oil and 11-year low coal prices, according to the Topline Securities Ltd brokerage.

In the July-March period of the last fiscal year, the local industry earned PKR34.847bn. The profitability growth was supported by 13 per cent YoY growth in sales as a result of higher local dispatches, firm local pricing, 802 basis points increase in gross margin to 40.9 per cent and 16 per cent decrease in selling and distribution expenses, said Topline Securities analyst Nabeel Khursheed.

The brokerage assessed the financial results of 15 cement markers, out of 19 players, representing almost 100 per cent of the industry's market capitalisation. The report said the industry's profit grew 26 per cent to PKR16.303bn in the third quarter (Jan-March) of 2015-16 on the back of 20 per cent increase in local dispatches and rise in gross margins. 

Rising local volumes, stable local pricing and declining input costs (coal prices near 11-year low and falling power tariff) are likely to support margins of cement manufacturers, Mr Khursheed said. 

"We downplay any risk of a price war amongst cement manufacturers as the industry is already operating at around 85 per cent of capacity utilisation. If the local industry continues to grow at the same pace, we expect demand to outpace supply in the near future," he added. 

The brokerage report said local demand was strong because of a rise in housing projects and start of China-Pakistan economic corridor projects. Cement sales increased 9.93 per cent to 28.34Mt YoY for the period July-March 2015/16. Local dispatches rose 18 per cent to 24Mt and cement exports fell 19 per cent to 4.406Mt in period under review.

Comment by Riaz Haq on June 17, 2016 at 4:50pm

#Pakistan #cement industry continues growth. Per capita consumption to rise from 147kg in 2015 to 250kg in 2020.

http://tribune.com.pk/story/1122920/cement-industry-poised-continue...

Pakistan’s cement industry will continue to grow over the next few years due to strong pricing power and contraction in supply and demand gap, a Topline Securities report said on Tuesday.

The capacity utilisation of Topline Cement Universe – a sample of cement companies listed on Pakistan Stock Exchange (PSX) – is likely to reach 96% in fiscal year 2018 from 78% in fiscal year 2015.

Gross margins of Topline Cement Universe will reach 47% by fiscal year 2020 (which were 34% in fiscal year 2015) while earnings before interest, taxes, depreciation, and amortisation (EBITDA) margins will reach 46% by fiscal year 2020 (34% in fiscal year 2015).

Resultantly, Topline Cement Universe’s profitability is expected to grow at 4-year (fiscal year 2017 to fiscal year 2020) Cumulative Annual Growth Rate (CAGR) of 24%.

Pakistan’s cement industry has entered into a new paradigm. The turnaround in macroeconomic fundamentals, mega projects under the umbrella of China-Pakistan Economic Corridors (CPEC) and booming private sector spending are accelerating local cement demand.



“We believe economic recovery will continue to bolster domestic demand. Based on past trend, we have applied a factor of 2 times to our average real GDP growth forecast of 6% during fiscal year 2017 to fiscal year 2020 in order to arrive at average local cement growth forecast of 12% during the same period,” the report said.

This should take per capita cement consumption of Pakistan from 147kg in fiscal year 2015 to 250kg in fiscal year 2020.

Major capacity additions of 19 million ton (42% of current capacity) worth around Rs192 billion are in pipeline (from fiscal year 2017 to fiscal year 2020) in Pakistan. “Despite these additions, we see no price war risk as additional capacities will easily be absorbed due to buoyant cement demand.”

The government in budget for fiscal year 2016-2017 has changed the federal excise duty (FED) on cement bags from variable 5% of retail price to fixed Rs50 per kg while duty on imported coal is reduced from 6% to 5%. “Thanks to strong pricing power, we believe that, the net impact of Rs33 per bag will be gradually passed on,” the report added.

However some developments can change the present scenario including price competition, imported cement, higher than anticipated rise in gas tariff, delay in construction projects and change in economic policy

Comment by Riaz Haq on July 20, 2016 at 10:13pm

A significant rise in infrastructure projects in the wake of China-Pakistan Economic Corridor (CPEC) is also expected to accelerate demand for iron, steel and cement.
“Imports of both steel scrap and steel products increased by 27.3 per cent and 30.1 per cent, respectively, during July-March FY16,” said the SBP report.
“The imports posted extraordinary growth despite imposition of anti-dumping duties for four months on import of cold-rolled coils and sheets from China and Ukraine,” said the report.

http://www.hellenicshippingnews.com/chinese-imports-capture-steel-m...


The country produces six million metric tons of steel per year, as per a report published by the State Bank of Pakistan (SBP).

This includes raw products, iron ore and scrap flat products, sheets and plates used in the automotive sector, and long products (steel bars, wire rods, rails, and structures used in infrastructure development, and tubes and pipes).

However, per capita steel consumption in Pakistan is very low at 23.5 kilograms against 58.6 kilograms in India, as well as the Asian average of 261.3 kilograms and the global average of 216.9 kilograms, the report added.

https://www.thenews.com.pk/print/112676-Pakistan-produces-6MT-of-st...

Comment by Riaz Haq on December 4, 2016 at 9:45pm

#Pakistan's domestic #cement sales show 12% growth in Nov 2016. #CPEC https://www.thenews.com.pk/print/169090-Cement-sales-may-post-9pc-g...

Cement sales are likely to post nine percent year-on-year (YoY) jump in November due mainly to strong domestic demand, a brokerage reported on Thursday. Analyst Nabeel Khursheed at Topline Securities said cement industry is expected to record sales of 3.7 million tons in November.

Local sales are expected to be at 3.2 million tons in November, up 12 percent YoY and five percent month-on-month (MoM). “We remain upbeat on local sales outlook, owing to large scale infrastructure developments and higher demand from private sector,” Khursheed added. Exports are likely to remain at 0.5 million tons, up six percent YoY, but down four percent MoM. “This is mainly because of a likely 20 percent decline in dispatches to Afghanistan,” the equity analyst added. The neighbouring Afghanistan consumes 35 percent of Pakistan’s cement exports. The brokerage, citing the Pakistan Bureau of Statistics, said retail cement prices were in the range of Rs520 to 540/bag in north and Rs567-580/bag in south region in November. An average nationwide price was Rs545/bag.

Cement sales are likely to increase around nine percent to 16 million tons in the first five months of this fiscal year. Local sales would be up 11 percent to 13.6 million tons in the July-November period.

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