Analysis of Pakistan cement industry 2019
- 1. INDUSTRIAL ANALYSIS OF CEMENT INDUSTRY PRESENTED BY: ABDULLAH SOHAIL SAAD NASIR HAZIQ HUSSAIN SATTI MARIA TAYYAB
- 2. INTRODUCTION: • Cement Is The Most Important, And Widely Used, Building Material In The Modern Age. • It’s Used In Homes, In Office Buildings, Roads, Bridges And Infrastructure. • Pakistan Is The 14th Largest Country To Produce Cement. • There Are 24 Plants Of Cement In Pakistan ➢Northern Region 80% ➢Southern Region 20 %
- 3. BACKGROUND OF CEMENT INDUSTRY: • The Cement Industry Of Pakistan Has Come Since 1947. ➢Annual Production Of Cement : 300,000 Tons Per Year. ➢Total Installed Capacity : 470,000 Tons Per Year. • In 1921 The First Cement Factory Was Established. • By 1954, The Demand For Cement Was Much Greater Than Installed Capacity. Required Million Ton Annually But Only About 660,000 Tons Were Being Supplied.
- 4. CONTD • The Pakistan Industrial Development Corporation (PIDC) Took The Initiative Of Expanding Production In The Country. • Two Cement Factories Were Established At ➢Zeal Pak With Installed Capacities : 240,000 Tons ➢Maple Leaf With Installed Capacities: 100,000 Tons
- 5. SALIENT FEATURES OF CEMENT INDUSTRY OF PAKISTAN: As Per All Pakistan Cement Manufacturer Association: • The Installed Production Capacity Of Cement Is 57 Million Tons As Per March 2019. • Local Dispatched 29.45 Million Ton ➢ North Region: 23.20 Million Tons ➢ South Region:6.45 Million Tons
- 6. CONTD • Export 5.13 Million Ton ➢North Region: 1.99 Million Tons South Region: 3.14 Million Tons • The Main Export Markets Of The Cement Industry Are Afghanistan, India, And Others. • In The Year 2018-19 (9 Months) The Capacity Utilization Is Of 80.71% Whereas In The Year 2017- 18 It Was 85.87%. • On Average Its Per Capita Utilization Is 140kg.
- 7. MAIN PLAYERS IN THE MARKET: TABLE Company Installed Capacity (%) Bestway cement 18 Lucky Cement 16 D.G Khan cement 13 Fauji Cement 6 Maple Leaf Cement 6 Attock Cement 6 Dewan Cement 5 Askari cement 5 Kohat Cement 5 Cherat Cement 5 Other 15 Total 100 GRAPH
- 8. TREND
- 10. LIFE CYCLE •STABILIZATION PHASE ➢Less Players ➢Growth Rate
- 11. CHALLENGES: ➢FLATNESS IN DEMAND ▪ PSDP ▪ Local Consumption ➢HIGH MARKUP RATES ➢CURRENCY DEPRECIATION
- 12. CONTD ➢REDUCTION IN ALLOCATION OF THE PSDP ▪ Government policy ▪ Delay In CPEC ➢Higher Interest Rates ▪ 5.75% TO 10.75% ▪ Lower Construction Financing
- 13. CONTD ➢Increase In Production Cost ▪ Variable cost is more ▪ Coal prices ➢Exports With Neighbors ➢Gearing
- 15. NET PROFIT MARGINS 2016 2018 FAUJI 38% 22% LUCKY 19% 17% ATTOCK 21% 16% BESTWAY 26% 25%
- 16. OPERATING PROFIT MARGINS 2016 2018 FAUJI 8% 5% LUCKY 27% 19% ATTOCK 12% 5% BESTWAY 14% 10%
- 17. MARKET PRICE 2016 2018 FAUJI 36 22 LUCKY 740 345 ATTOCK 240 124 BESTWAY 174 129
- 18. PROMISING FUTURE OF PAKISTAN CEMENT INDUSTRY: •Quality •Impact Of CPEC •Budget •Naya Pakistan Housing Scheme
- 20. COMPETITIVE RIVALRY • GROSS PROFIT MARGINS UP TO 30-40% • NO INNOVATION, OPC (ORDINARY PORTLAND CEMENT) • NO QUALITY CHANGE • PRICING POWER • MAJOR FIRMS AND THEIR MARKET SHARE COMPANY MARKET SHARE LUCKY CEMENT 19% BEST WAY CEMENT 14% DG KHAN CEMENT 11% MAPLE LEAF CEMENT 8% FAUJI CEMENT 7% TOTAL 59%
- 21. THREATS OF NEW ENTRANTS •HIGH SETUP COST: ➢190 MILLION INITIAL COST ➢150 MILLION CAPITAL EXPENDITURE EVERY YEAR. •COLLUSION BETWEEN FIRMS: ➢FINED 6.35 BILLION IN 2009 BY COMPETITION COMISION OF PAKISTAN ➢STILL UNDER PROBE OF MONOPLY CONTROL AUTHORITY •HIGH TAXES BY GOVERNMENT
- 22. THREATS OF SUBSTITUTE •PAKISTANI BINTONITE ➢JEHANGIRA BENTONITE ➢LOW COST ➢HIGH AVAILABILITY ➢HIGH STRENGTH •GYPSUM PLASTER ➢HIGH RESERVES ➢LOW COST
- 23. BARGAINING POWER OF BUYERS • GOVERNMENT: ➢FOR LARGE SCALE PROJECTS ➢PROVIDE HIGH REVENUE TO CEMENT INDUSTRY ➢HIGH BARGAINING POWER. • DOMESTIC: ➢60% CONSUMPTION ➢LESS BARGAINING POWER. • EXPORTS: ➢TO INDIA AND AFGHANISTAN AND SOME OTHER COUNTRIES ➢VIA LAND AND SEA ➢LESS BARGAINING POWER.
- 24. BARGAINING POWER OF SUPPLIERS •RAW MATERIALS ➢LIMESTONE ➢CLAY ➢IRON ORE ➢GYPSUM (ALL THESE RAW MATERIALS ARE VASTLY AVAILABLE IN PAKISTAN) ➢FUEL ➢33% OF THE COST OF CEMENT INDUSTRY IS OF ITS FUEL THAT IS COAL ➢COAL IS IMPORTED BY WHOLE CEMENT INDUSTRY ➢SUPPLIERS HAVE HIGH BARGAINING POWERS
- 25. FACTORS AFFECTING CEMENT INDUSTRY • ECONOMICAL ➢Inflation ➢Interest Rate • NON ECONOMICAL ➢Consumer Sentiments ➢Geographic Location
- 26. • INFLATION ➢Not a perfect competition in cement industry ➢High variable cost (33% of fuel cost is incurred and this fuel is also imported so inflation affects it highly) • INTEREST RATE ➢Interest Rate Increased From 5.75% In 2016 To 10.75% In 2019 ➢This Increase In Interest Rate Has A Negative Effect On Stock Prices Of Industry Company 2016 2017 2018 2019 STOCK PRICES Best way 180 245 135 97 Fauji cement 44 45 25 17 Lucky cement 615 960 632 365 Dg khan cement 240 132 70 57 Maple leaf cement 122 67 28 20
- 27. •CONSUMER SENTIMENTS: ➢There is much inflation in Pakistan ➢People are more concerned about fulfilling their necessities ➢Less spending more saving •GEOGRAPHIC LOCATION ➢ 80% Plants Are In North Region Of Pakistan ➢Coal Is Imported Via Sea.
- 28. SWOT ANALYSIS Strengths: A strong industry. Maintained growth of production and exports. An easy access to its production resources. Good reputation in the international market. Opportunities: Future potential growth Emerging export market Construction industry boom in market Research to develop new products Weaknesses: Cost of transport Lack of research and development Facing lack of funds to take up new projects. Lacking in professional expertise within the industry. Threats: Supply of inferior coal and high cost of imported coal High incidence of taxes High input cost Decline in profitability
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