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

[Riaz Haq]

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

[Riaz Haq]

#Pakistan #Suzuki to invest $460 million to set up 2nd #automobile manufacturing plant http://www.pakistantoday.com.pk/blog/2016/12/15/pak-suzuki-motors-p... …
After the announcement by the Korean and French auto giants to invest in Pakistan’s auto sector, the major incumbent Japanese player Pak Suzuki Motors has unveiled a plan to invest $460 million to set up a second assembly plant in the country.

Pak Suzuki Motors Managing Director Hirofumi Nagao called on the Finance Minister Ishaq Dar on Thursday and discussed his company’s plan of future investment in Pakistan.

The MD said that his company was ready to invest $460 million in Pakistan to set up a second plant. After completion of formalities, the new project would be completed within a period of two years and may start production by the end of 2018, he informed.

The minister asked the Pak Suzuki Motors MD to submit a complete plan with all the details to process the request in accordance with prescribed codal formalities and procedures. He said the government was committed to providing a level playing field to all the prospective investors.

The government has implemented a new auto policy from this fiscal year that provided tax incentives up to three years for the new players in the sector. The incentives were not offered to the existing three Japanese players. However they were provided incentives for modernization and expansion.

Japanese auto giants are demanding the similar policy incentives for making new investment in the country. The government may provide similar incentives to Japanese auto makers if they make investment in setting up new plants, an informed source said.

A week back a big Pakistani conglomerate announced that they planned to assemble autos in the country with the help of Korean auto giant Kia Motors. While a delegation of French company Renault formally informed the Finance minister in Paris that they planned to set up an auto manufacturing plant in Pakistan.

The minister said Pakistan has been projected by JETRO as the second best place for investment in the world. He said that the turnaround of Pakistan’s economy, macroeconomic stability, improvement of energy and security situation in the country has provided a conducive atmosphere to foreign direct investment.

He said that a number of new entrants have shown keen interest to invest in automobile manufacturing sector as well. The meeting was attended by senior officials of the Ministry of Finance and the members of the delegation of Pak-Suzuki.

[Riaz Haq]

#Suzuki Vitara 'game changing' light SUV launches in #Pakistan
http://www.dawn.com/news/1303460


Trailblazer in the small cars industry and producer of successful 4x4 range sports utility vehicles (SUVs), Pak Suzuki on Wednesday launched one of the lightest SUV’s named Vitara in Pakistan.

The 4th generation crossover Vitara has been introduced in Pakistan in response to the steadily climbing demand of SUVs as trends change in the local vehicle market. To this end, the top of the line Vitara GLX is available for Rs. 3,799,000 and the Vitara GL+ is available for Rs. 3,490,000

Before its launch in Pakistan, Vitara had already received an overwhelmingly positive response in Europe and has won several prestigious awards for its performance.

As far as security is concerned, Vitara also earned high ratings by credible by global inspectors.

Vitara comes with a 1.6L naturally aspirated engine which delivers a decent 118bhp at 6,000 revs. This may not sound much however the USP of this product is its weight. Weighing in at only 1185 kilos the

Vitara is one of the lightest SUV’s on offer. This not only allows it to carry more but also improves its power to weight ratio which stands in at 104 bhp/ton. Other big brands offering turbocharged engines may offer more power however the power to weight ratios remain well under 100 which clearly indicates how well the Vitara is when it comes to performance.

In addition to push start functionality, the Vitara comes standard with multi-function steering that features cruise control and audio control. The 6 speed Automatic transmission is enabled with a manual mode which allows the driver to have the manual changing sensation with the paddle shifters equipped on the steering wheel. The multifunction display shows the economy, mileage and range of the vehicle along with other variables. The air conditioning system of Vitara can be automatically controlled with input from outside temperature sensors.

The hi-spec Vitara also comes equipped with a panoramic sunroof which makes the drive even more pleasurable. Keyless entry is also enabled for the hi-spec variant along with automatic headlamps and wipers for driver’s convenience.

[Riaz Haq]

#UK company to invest $400 million to build #cement plant in #Pakistan. #CPEC #economy

https://www.worldcement.com/indian-subcontinent/06022017/british-co...

UK company, Asian Precious Minerals (APML), is to build a new cement plant in Pakistan, according to local news reports, with an investment of US$400 million.

The plant is to be built in the province of Khyber Pakhtunkwha in the northwestern region of Pakistan. The investment was announced at a meeting between APML officials, the Chief Minister of Khyber Pakhtunkwha, Pervez Khattak, and officials from the British High Commission.

“We are delighted to be investing in a new cement plant in Khyber Pakhtunkwha,” said Nadim Khan, CEO of APML. “We look forward to constructing a model, state-of-the-art and environmentally friendly cement plant.

Khan also praised the provincial government for improving the security situation in Khyber Pakhtunkwha, which borders Pakistan’s tribal region and Afghanistan, as well as its “pro-business stance and good governance policy”.

“This British investment will help create local jobs and stimulate the local economy,” said Chief Minister Khattak. “I am glad to see that the UK recognises the dramatic improvements in the province and I look forward to welcoming more British companies in future.”

Pakistan’s cement sector is currently booming with utilisation rates at cement plants reaching over 90%, according to the All Pakistan Cement Manufacturers Association. In the six months to the end of 2016, cement shipments in the country grew to 19.896 million t on the back of local demand growth of 11.07%.

“Pakistan growth is being driven by the Economic Corridor with China (CPEC),” according to cement industry analysts, IA Cement.

“The CPEC allocates US$11 billion to infrastructure projects and US$35 billion towards new power projects and has already led to a strong double-digit growth in cement demand in 2016.In 2017, many projects will either reach completion or be in the full construction phase [and] we therefore expect another year of strong growth with cement demand rising 8 – 10%.”

[Riaz Haq]

Cement Makers See China-Led Bonanza as Pakistan Spends Billions
by Faseeh Mangi , Kamran Haider , and Khalid Qayum
June 1, 2017, 2:30 PM PDT
https://www.bloomberg.com/news/articles/2017-06-01/cement-makers-se...

Nation’s cement output to rise by half as most firms expand
China is financing more than $50 billion of Pakistan projects
In his air-conditioned office protected from the scorching heat and dust outside, S.M. Imran points at a white lined map pinned on his wall showing Power Cement Ltd.’s planned expansion at its plant in Pakistan’s arid southern Sindh province.

Power Cement is aiming to triple capacity, riding a wave of Chinese-financed infrastructure projects across Pakistan valued at more than $50 billion. It’s part of Chinese President Xi Jinping’s biggest gambit in his “One Belt, One Road” project to rebuild the ancient Silk Road, a trading route of ports, railways and highways snaking across mountains, deserts and disputed territory through Asia to Europe and Africa.

The anticipated demand has been a boon for Pakistan’s cement industry, which is expected to increase capacity by 56 percent to 70 million tons in five years, according to Karachi-based brokerage Alfalah Securities Ltd.

“We used to carry stocks, but not anymore,” said Imran, a project director and cement industry veteran who has been in the business for four decades. “This capacity will be required.”

Mega Projects

Cement-makers are betting Prime Minister Nawaz Sharif will ensure timely completion of much needed infrastructure projects ahead of next year’s election, which the premier is widely expected to contest for a second consecutive term.

With that in mind, the government has committed to a $9.6 billion expansion of the national roads network, such as the Karakoram highway -- the main trade route between China and Pakistan -- along with about $35 billion on energy projects and power plants to end daily blackouts.

Encouraged by the China-Pakistan Economic Corridor, or CPEC, Gharibwal Cement Ltd. is doubling capacity to more than 13,000 tons a day by August, according to company spokesman Rana Muhammad Ijaz, who said its existing plant is producing at its peak. Power Cement Ltd. is boosting its ability to churn out 10,700 tons a day, while Cherat Cement Co. announced plans to build a third unit days after completing a second, with a capacity of 7,100 tons a day.

Cement stocks have also outpaced the nation’s benchmark stock measure, with a group of 21 companies rising an average 47 percent in the past year, compared to the KSE100 Index’s 34 percent gain.

“The demand isn’t going down because of a boom in the construction sector,” Ijaz said. “Mega projects are being built and the CPEC is a key factor for this boom.”

[Riaz Haq]

(Pakistan Cement) Industry data on Wednesday showed that local cement sales rose 10.4 percent to 36.4 million tonnes during the last fiscal year, while exports sharply fell 22.8 percent to 4.5 million tonnes. 

https://www.thenews.com.pk/print/214600-Cement-sales-up-54pc-to-409MT

Cement industry witnessed a 5.4 percent surge to 40.9 million tonnes in its sales during the last fiscal year of 2016/17 as local construction sector boomed to have broken its annual growth record of the past five years. 


Analyst Nabeel Khursheed at Topline Research attributed the double digit growth in local sales for the second year in a row to ongoing residential construction projects and infrastructure development under China-Pakistan Economic Corridor (CPEC).

Khursheed said the government released Rs715 billion under public sector development programme for FY17, 90 percent of the total allocation, “which bodes well for the construction sector.”

Industry’s annual capacity utilisation reached 89 percent, a rate that was last achieved in the fiscal year of 2005/06. The capacity utilisation stood at 85 percent in 2015/16.

Construction sector reported 9.1 percent growth in FY17, while annual growth for the last five years (FY12-16) growth averaged at 6.3 percent. Credit offtake in construction sector was up 40 percent to Rs129 billion in the last fiscal year over the previous year.

Stock analyst said exports fell short of expectation due to manufacturers’ increased focus to local market, tapering export to Afghanistan, which consumes 40 percent of Pakistan’s cement outflows, and competition from the Iranian substitute.

Sales from cement factories located in north region increased 10 percent in FY17 to 29.817 million tonnes, while cement makers based in south recorded 11 percent growth in sales to 6.594 million tonnes. 

Exports of north as well south cement mills decreased 16 percent to 2.889 million tonnes and 33 percent to 1.643 million tonnes, respectively. 

In June, cement sales remained flat at 3.354 million tonnes as compared to the same month a year earlier, while export fell 10 percent over May. 

“The decline in monthly sales figures is due to slowdown in construction activities during Ramazan coupled with the prolonged Eid holidays,” said Fatima Mohsin Ali, an analyst at Taurus Securities Ltd.

Generally, growing local demand gave a leeway to cement markers to increase prices and avert the pressure built due to high coal prices previously. 

“Players were able to pass on the impact of federal excise duty (FED) by increasing prices by additional Rs15-20/bag thanks to robust demand outlook,” Khursheed said. “We believe if demand remains strong, pricing arrangement will continue.”

Government raised FED on cement to Rs1.25/kg from Re1/kg in the budget announcement for the current fiscal year of 2017/18.

International coal prices averaged $76/tonne as compared to its peak of $91/ton in November 2016.

Market researchers said cement mills based in north region factored in FED impact by pushing up prices by Rs15 to 20/bag to Rs545 to 575/bag. Prices in southern region are still hovering between Rs560 and 585/bag. 

Ali expected an upward revision in cement prices by southern players too in the next one week, “settling in the range of Rs575 to 600/bag.”

[Riaz Haq]

Chief Engineer Yoshiki Konishi: #Pakistan is top market for #Toyota #Corolla cars in #Asia and 4th in the world.

http://nation.com.pk/business/08-Aug-2017/pakistan-has-4th-highest-...

Remarkable success of Corolla in Pakistan has made Pakistan number 1 in Corolla sales in Asia Pacific and number 4 in the world,” said Yoshiki Konishi, Chief Engineer for Corolla, Toyota Motor Corporation at the 26th IMC Dealers Conference held at a local hotel here recently.

The theme of the conference was “Race to Ace”. Dealership CEOs, executives from Toyota Motor Corporation, Toyota Tsusho Corporation, senior management from the House of Habib, dealer management and teams and the IMC management attended the conference.

In his video message, Yoshiki Konishi appreciated IMC’s efforts in successfully promoting Toyota in Pakistan for the last 26 years. He added that since its inception 44.1 million Corolla cars have been sold globally.

“Technology is changing the entire landscape of business. Big names which fail to change according to the environment soon become part of history and we have to acknowledge the technological change happening in our country,” said Chairman Indus Motor Company (IMC), Ali Habib. “We have gone back to the basics, that is, Toyota Way,” he added.

The new facelift model of 11th generation of Corolla was unveiled in the event, which will be available in Pakistan from August. “The most beautiful Corolla is here to excite Pakistani market with new features like Push Start, Smart entry, 16 inch Alloys, 9 inch infotainment, new interior, Vehicle Stability Control etc.” said the Chief Executive Officer, IMC, Ali Asghar Jamali.

He said their special emphasis is on ‘best in class’ safety features to standardize Dual SRS Air Bag across all the variants of Toyota Corolla, ISO Fix Seat Anchors, Front seats 3point ELR with Pre-Tensioner and Force Limiter seatbelts in all variants.

[Riaz Haq]

THE EXPRESS TRIBUNE > BUSINESS
Cement sales touch record high at 4.2 million tons in October

By Our CorrespondentPublished: November 4, 2017

https://tribune.com.pk/story/1549343/2-cement-sales-touch-record-hi...

Propelled by demand from new infrastructure projects in the country, overall cement sales touched a new peak at 4.222 million tons in October 2017, up 19.71% from the offtake of 3.526 million tons in the same month of the previous year, according to statistics released by the All Pakistan Cement Manufacturers Association on Friday.

Total sales in the first four months (Jul-Oct) of fiscal year 2017-18 reached 14.570 million tons, which was 16.53% higher than dispatches of 12.503 million tons in the corresponding period of previous year.

The increase came from the surge in domestic demand, though exports stood unimpressive and dropped 16.16%.
Domestic cement consumption rose 25.61% to 3.779 million tons in October 2017 whereas exports continued to decline as they went down 14.55% to 0.443 million tons.

“Higher cement consumption in the country is a sign of growing economy that is having positive impact on over three dozen industries connected with the construction sector,” an association spokesman commented.

However, he said exports were below par which was a cause for worry because the industry still had idle capacity. “Almost all the decline in exports is via sea; shipments to India have also been affected but not to that extent,” he said.

The spokesman pointed out that demand in the north zone stood surprisingly very high as consumption in the region hit 3.148 million tons in October 2017. “It is for the first time that the north zone has consumed more than three million tons in a month.”

In October 2016, the consumption in the north zone totalled 2.489 million tons.

Cement demand in the southern region increased from 0.519 million tons in October 2016 to 0.631 million tons in October 2017.

Owing to the robust growth in domestic cement consumption in the first four months of FY18, the industry utilised over 93% of installed capacity.

“This is the highest capacity utilisation in the past 20 years, however, 1.08-million-ton capacity is still sitting idle,” he said, suggesting this could have been consumed by exports had government policies been export-friendly.


He cautioned that higher cement consumption did not mean economic planners should ignore the challenges faced by the industry.

Among the challenges, he cited the country’s tough regulations and said the industry was surviving because it had upgraded its technology that provided the strength needed to take any challenge head-on.

“Our quality is the best in the region. No cement can compete with Pakistani cement if imported at real and fair value after paying all levies. However, weak border controls and lax customs vigilance allow cement from across the border at unfair valuations,” he added.

The spokesman asked the government to cut the rate of excise duty in order to give a further boost to demand. Similarly, the duty on coal imported by the sector should be brought on a par with other sectors.