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1. Alternate Research (Pvt) Ltd.
Cement Sector – Industry Analysis
Ali Jumani
Intellectual Property of Ali Jumani. Please refrain from distributing it in any shape or form, either online or in print.

2. Major Players
• Lucky Cement Limited
• Bestway Cement Limited
• D.G.Khan Cement Limited
• Maple Leaf Cement Factory Limited
• Kohat Cement Company Limited
• Dewan Hattar Cement Limited
• Attock Cement Pakistan
• Pioneer Cement Limited
• Thatta Cement Limited
• Flying Cement Limited
• Cherat Cement Company Limited
• Askari Cement Limited

3. Market Segmentation
• Cement market in Pakistan is divided into two zones:
• North Zone
• South Zone.
• The North zone includes Punjab,
AzadKashmir, KPK and the
upper region of Baluchistan.
• In North there are about 19 cement
plant units of 14 players with
annualized cement production
capacity of about 37MT
(81% of total country
capacity).

4. Market Segmentation
• The remaining area of the Baluchistan and entire Sindh constitute
the Southern zone.
• South is having about 5 players with annualized cement production
capacity of about 8.6MT (19% of total country capacity).

5. Industry Location

6. Cement ProductionCapacity&
Dispatches
July to
June
Production
Capacity
% age
Incr/(Dec)
Local
Dispatches
% age
Incr/(Dec)
Exports
% age
Incr/(Dec)
Total
Dispatches
% age
Incr/(Dec)
Capacity
Utilization
Surplus
Capacity
(Mn. Tonnes) (Mn. Tonnes) (Mn. Tonnes) (Mn. Tonnes) (Total) % age (Mn. Tonnes)
2000-2001 15.53 -5.16% 9.93 -0.04% - 0.00% 9.93 -0.04% 63.95% 5.60
2001-2002 16.10 3.65% 9.83 -1.01% 0.11 100.00% 9.94 0.06% 61.73% 6.16
2002-2003 16.32 1.37% 10.98 11.66% 0.47 342.53% 11.45 15.21% 70.16% 4.87
2003-2004 17.28 5.87% 12.54 14.25% 1.12 137.02% 13.66 19.31% 79.08% 3.62
2004-2005 17.91 3.65% 14.79 17.88% 1.57 39.96% 16.35 19.69% 91.32% 1.56
2005-2006 20.83 16.31% 17.05 15.29% 1.51 -3.83% 18.55 13.46% 89.08% 2.28
2006-2007 30.50 46.41% 21.03 23.38% 3.23 114.46% 24.26 30.77% 79.56% 6.23
2007-2008 37.68 23.54% 22.58 7.33% 7.72 139.06% 30.29 24.86% 80.40% 7.38
2008-2009 42.28 12.22% 20.33 -9.97% 10.98 42.31% 31.31 3.34% 74.05% 10.97
2009-2010 45.34 7.24% 23.57 15.95% 10.65 -3.03% 34.22 9.29% 75.46% 11.13
2010-2011 42.37 -6.55% 22.00 -6.64% 9.43 -11.47% 31.43 -8.14% 74.17% 10.97
2011-2012 44.64 5.35% 23.95 8.84% 8.57 -9.12% 32.51 3.45% 72.83% 12.13
2012-2013 44.64 0.00% 25.06 4.64% 8.37 -2.26% 33.43 2.82% 74.89% 11.21
2013-2014 44.64 0.00% 26.14 4.33% 8.14 -2.84% 34.28 2.54% 76.79% 10.36
2014-2015 45.62 2.19% 28.21 7.89% 7.20 -11.57% 35.40 3.27% 77.60% 10.22
2015-2016 45.62 0.00% 33.00 17.01% 5.87 -18.38% 38.87 9.82% 84.95% 6.29

7. 22.00
23.95
25.06
26.14
28.21
33.00
9.43
8.57 8.37 8.14
7.2
5.87
31.43
32.52
33.43
34.28
35.41
38.87
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
2011 2012 2013 2014 2015 2016
Domestic
Export
TOTAL
5 Year IndustryAnalysis
(In mt)

8. Exports Analysis
|----------------Cement--------------| |---Clinker--| Export Breakup
Financial
Years
Afghanistan
Via Land
India
Via Sea & Land
Other Countries
Via Sea
Other Countries
Via Sea
Total
Exports
%age
Incr/(Decr)
North
Zone
South
Zone
|-------------------------------Quantity in Metric T ons-------------------------------| |--Quantity in MT --|
2001-2002 106,620 - - - 106,620 100.00% 106,060 560
2002-2003 430,322 - - 41,500 471,822 342.53% 428,602 1,720
2003-2004 1,118,293 - - - 1,118,293 137.02% 1,088,218 30,075
2004-2005 1,407,900 - 157,270 - 1,565,170 39.96% 1,516,370 48,800
2005-2006 1,413,994 - 91,165 - 1,505,159 -3.83% 1,409,492 95,667
2006-2007 1,725,476 - 1,111,405 390,973 3,227,854 114.45% 1,929,938 1,297,983
2007-2008 2,777,826 786,672 3,045,995 1,106,127 7,716,620 139.06% 5,111,607 2,605,013
2008-2009 3,148,306 634,455 6,061,035 908,690 10,752,486 39.34% 6,989,136 3,763,351
2009-2010 4,017,361 722,968 5,625,391 283,436 10,649,156 -0.96% 6,952,774 3,696,381
2010-2011 4,726,996 590,104 3,910,675 200,169 9,427,943 -11.47% 6,688,655 2,739,284
2011-2012 4,715,109 605,453 3,247,268 - 8,567,830 -9.12% 6,266,327 2,301,503
2012-2013 4,404,633 482,214 3,487,255 - 8,374,103 -2.26% 6,105,815 2,268,288
2013-2014 3,655,201 677,305 3,804,021 - 8,136,528 -2.84% 5,418,214 2,718,314
2014-2015 2,872,951 696,337 3,625,781 - 7,195,069 -11.57% 4,467,534 2,727,535
2015-2016
(11months)
2,308,979 865,831 2,310,734 - 5,485,544 -17,41% 3,567,687 1,917,857

9. Top Cement Exporting
Countries
• Below are the 15 countries that exported the highestdollar value worth of cement during 2015:
• China: US$776.2 million (8% of total cement exports)
• Thailand: $658.9 million (6.8%)
• United Arab Emirates: $650.7 million (6.7%)
• Turkey: $550.9 million (5.7%)
• Germany: $510.6 million (5.2%)
• Spain: $489.2 million (5%)
• Japan: $395.7 million (4.1%)
• Vietnam: $378.7 million (3.9%)
• Canada: $367.4 million (3.8%)
• South Korea: $279.4 million (2.9%)
• Greece: $250.4 million (2.6%)
• United States: $249.4 million (2.6%)
• Portugal: $222.3 million (2.3%)
• India: $213 million (2.2%)
• Pakistan: $197.9 million (2%)
• Among the above countries, the fastest-growing cement exporters since 2011 were: Greece (up
119%), United Arab Emirates (up 83.3%), Portugal(up 62%) and Spain (up 53.9%).
• Those countries that posted declines in their exported cement sales were led by: Pakistan (down -
57.5%), Turkey (down -39.6%),Germany (down -32.4%) and South Korea (down -19.4%).

10. Market Share - Capacity
Lucky Cement Limited
16.19%
7.4 MT
Bestway Cement
Limited
17.45%
7.96MT
D.G.Khan Cement
Limited
9.25%
4.2MT
Fauji Cement
7.53%
3.4MT
Maple Leaf Cement
7.53%
3.37MT
Dewan Hattar Cement
6.35%
2.89MT
Market Share based of Operation Capacity of Cement
Bestway Cement Limited - Chakwal, Hattar &
Farooqia + PakCem Company Limited
Lucky Cement Limited - Pezu & Indus
Highway
D.G.Khan Cement Limited - D.G.Khan &
Chakwal
Fauji Cement Company Limited - Fateh Jang
Maple Leaf Cement Factory Limited -
Daudkhel
Dewan Hattar Cement Limited - Dhabeji &
Hattar

11. Market Share – Dispatches
Lucky Cement
19.19%
6.79MT
Kohat
5.21%
1.85MT
MLCF
8.36%
2.96MT
Fauji
7.29%
2.6MT
DGK
10.86%
3.86MT
Bestway
13.72%
4.87MT
Market Share 2015
Lucky Cement
Kohat
MLCF
Fauji
DGK
Bestway

12. ProductionCapacity & Future
44.64
44.64
45.62
45.62
47.3
47.3
51.1
53.4
40 42 44 46 48 50 52 54 56
2012-2013
2013-2014
2014-2015
2015-2016
2016-2017
2017-2018
2018-2019
2019-2020
Production Capacity
Plant by Cherat of 1.3 MT
DGKC capacity increase by 2.7 MT & Attock capacity increase by 1.1 MT
Lucky Cement Plant of 2.3 MT capacity
(In metric tonnes)

13. Industry Utilization

14. Industry SWOT Analysis
Strengths
• Cement a Strong Industry
• Sustained Growth in Production
• Easy Availability of Production
Resources
• Surplus Production for Local and
Export Markets
• Good Local and Strong Industry
Base
• International Reputation
Weaknesses
• Cost of transport
• Lack of Professional Expertise
within Industry
• Dependence on Cartelisation for
adequate Revenue
• Lack of Research & Development

15. Cont.
Opportunities
• Future Growth Potential
• Rising Demand
• Emerging Export Markets
• Construction Boom
• Developing a Long Term Vision
and Strategy
• Research to Develop New
Products
• Focus on Cost Optimisation
• Possible switch over to
Cement Roads
• Conversion to Coal
• Availability of Finance
Threats
• Low Per Capita Consumption
• High Incidence of Taxes
• High Input Cost
• Supply of Inferior Quality
Coal and High Cost of
Imported Coal

16. Cement ManufacturingProcess
Three types of processes:
1) Wet Process (Obsolete)
-Poor kiln heating
-Large water requirements
2) Semi-WetProcess
- Suited for RM with extreme elasticity
- Not much popular due to high fuel and energy consumption
3) Dry Process (Used in Pakistan)
- Suitable for RM with low moisture
- Low fuel and energy consumption
- Less maintenance costs
- Higher kiln efficiency
- Most beneficial

18. Raw Materials
• The raw materials needed to produce cement (calcium
carbonate, silica, alumina and iron ore) are generally
extracted from limestone rock, chalk, clayey schist or clay.
• These raw materials are extracted from the quarry by
blasting. They are then crushed and transported to the plant
where they are stored and homogenized.

19. ManufacturingCost Break up
• Fuel & Gas comprises around 64% of manufacturing cost;
while
• Wages of production workers, plant manager and etc. (around
6%)
• RM (8%)
• Packaging (7%)
• Others (15%)

20. Energy Efficiency & Production
• Captive Power Plants (coal-based, FO-based, gas-based
and dual-fuel)
• Waste Heat Recovery Systems(WHR)
• Tyre Derived Fuel (TDF)
• Refused Derived Fuel (RDF)
• Pakistan can import Sulphur Washing plants

21. Energy
• 60-70% is the cost of energy in production of cement
• Coal (USD 53.30/Ton – PKR 5,586)
• Gas (PKR 750/MMBTU)
• Oil Furnace (PKR 28,425 M.T)
• Electricity (USD 10 cents per unit – PKR 10.47)
• Average electricity consumption is in the range of 90-130 kWh per tonne of cement,
depending on the technology and the age of the cement plant.
• Currently, around 90 percent of the cement industry’s coal requirement is met
through imports from Indonesia and South Africa with the present volume being over
three million tonnes per year.
• Hence, even a little fluctuations in the fuel and gas prices widely affects the sector.
• Constant rise of gas and electricity tariff casting a negative affect on the profitability
of the sector.

22. Drivers & Concerns
• Major driver for cement consumption is infrastructure development
and house-building projects.
• PSDP (PKR 1,675bn – 2016)
• CPEC
• Construction Industry (growth of 13% year on year during 2015-16 )
• Concerns
• The industry players fear that additional excise duty might dampen
the construction activities.
• The presence of cheap Iranian cement in Africa and capacity
additions in the region are fueling competition.
• Iranian cement might make further inroads into local markets in view
of the lax border checks on smuggling and the government’s
indifference to under-invoicing.
• Volumes to Afghanistan, one of Pakistan’s biggest export markets
declined because of reduced investments and increased competition
from Iranian cement.

23. Factors InfluencingCement
Industry
• There are certain factors that influence the cement industry. The factors
include:
• Economic scenario – Phases of growth in the economy are positively linked
to cement company growth.
• Cost structure and competitiveness – There isn’t much that cement
companies can do regarding cost structure because the margins are less to
begin with. Cost advantages are usually due to companies having access to a
cheaper power source, a quality limestone reserve, or being close to bigger
markets.
• Legal, regulatory, and environmental scenario – The cement industry is
affected by regulatory norms. This is prominent in developed countries
where environmental issues are more stringent. This adds to the companies’
costs.
• Technological advancement – A disruptive innovation can give the innovating
company an advantage. For example, when companies moved from the wet
manufacturing process to the dry manufacturing process, there was a cost
savings of 5%–10% of the overall cost structure.
• Geographic advantages – It’s an advantage for companies to
be near limestone mines or waterways. Ease of transportation is an
advantage.
• Winterfactor – Constructionactivities tend to decline

24. Taxes
Cement in Pakistan is subject to various taxes
• Corporate Income Tax - 31% of taxable income;
• Federal excise duty (FED) – Rs. 1 per KG
• Sales Tax 17% of the MRP
• Import Duty on Coal 6%  5%
• Gas Infrastructure Development Cess (GIDC) (Rs200 per
mmbtu)

25. Major Export Regions
• Afghanistan (by road)
• India
• Sri Lanka (by sea)
• Sub-Saharan Africa (by sea) - Africa’s urban population is
expected to rise to 865 million by 2050 thus could face
housing shortage.

26. Global Scenario
• PCA projects global cement consumption to record sustained growth during 2015-2018, but
at a less robust pace than previously expected. World cement consumption is expected to
grow 2.2 percent in 2015, 3.7 percent in 2016, and remain near 4 percent growth during
2017-2018. World cement consumption grew an estimated 4.6 percent in 2014 from 4.0
billion metrictons in 2013 to 4.3 billion metrictons.
• World demand for cement is projected to rise 4.5% per year to 5.2bn MT in 2019. Gains will
continue to be driven by healthy increases in construction activity in developing countries
throughout the Asia/Pacific and Africa/Mideast regions, driven by economic growth and
increasingper capita income levels.
• One of the global researches predicts that Chinese cement industry will continue to
dominate the global market with more than half of the global cement production till 2019.
North American industry will also contribute heavily as they are recovering from
recessionary conditions that began in 2007.
• In terms of growth, India will have the fastest growth by 2019 with the rate of 8.0% per
year. Many other developing countries in the Asia/Pacific region will post similarly strong
growth, includingVietnam, Indonesia, and Pakistan.
• The Asia-Pacific region has the largest share of the global cement market in terms of
consumption. Other countries such as Iran, Brazil, Indonesia, Turkey, Russia and Japan hold
great potential for growth due to rapid urbanization and industrialization. European and
North American countries are also having healthy growth due to steady demand for
cement.

27. Regional and Associated
Cement Market

28. Local Scenario
• Real estate and builders are consuming 70% of cement while 30% is used in
infrastructure
• What makes the quality of Pakistani cement exquisite is the basic raw material
and limestone they use and that makes other countries prefer our cement over
other cement producers. But, its per capita cement consumption stills stands at
140 kgs which is one of the lowest the lowest in the world since global average
per capita cement consumption is 500kgs.
• UAE and South Africa were used to be the thriving markets for Pakistani cement
exporters in last few years but they have started building up their own cement
production capacities to establish their local cement industry, this has not only
adversely affected Pakistani cement manufacturers in terms of exports but also
significantly increased the global competition which has negatively impacted
cement prices as well.
• It is expected that cement manufacturers in Pakistan will invest around $1 billion
to increase production capacity over the next three years in view of ever growing
demand within domestic market from development projects under the public
sector development programme, China-Pakistan Economic Corridor and other
housing schemes. Usually, industry starts planning to add more capacity
whenever the capacity utilization touches 80-85 percent mark to cater the
increase in demand.

29. Current News
• The Environmental Protection Agency (EPA) has issued directives to
the Hazara and Kohat administrations to stop production at two
cement plants in breach of EPA regulations on dust pollution. (24th
June 2016 )
• Askari Cement Ltd is planning to install a waste heat recovery (WHR)
plant for its 3500tpd clinker line at its Wah works in Rawalpindi,
Punjab. (1st July 2016)
• At least three laborers died while working in a cement factory in DG
Khan late on Saturday when they became trapped in the furnace.
(July 3rd, 2016)
• Poineer Cement installing new production line with approx. capacity
of 7000 tons clinker per day. (4th July 2016)

30. PSX-100 Snapshot
CEMENT
SYMBOL LDCP OPEN HIGH LOW CURRENT CHANGE VOLUME
Attock Cement 238.71 239.90 241.00 239.00 240.22 1.51 4,900
Bestway Cement 173.68 179.99 179.99 176.25 176.62 2.94 600
Cherat Cement 119.57 119.25 120.40 118.50 120.17 0.60 165,800
D.G.K.Cement 190.49 189.01 192.49 188.02 191.05 0.56 1,383,900
Dandot Cement 9.25 9.75 9.75 9.75 9.75 0.50 10,000
Dewan Cement 14.48 14.64 14.65 14.30 14.60 0.12 2,424,000
Fauji Cement 35.80 35.81 35.85 35.60 35.80 0.00 511,000
Fecto Cement 115.50 114.30 118.97 114.25 117.75 2.25 63,300
Gharibwal Cemen 47.50 45.19 46.15 45.19 46.15 -1.35 1,000
Javedan Corp. 29.47 29.49 29.50 29.49 29.50 0.03 11,000
Kohat Cement 261.92 262.00 266.00 262.00 265.03 3.11 48,400
Lucky Cement 648.51 646.00 656.00 640.30 644.71 -3.80 167,750
MapleLeafCement 105.51 105.36 106.00 104.52 105.33 -0.18 732,000
Pakcem Ltd 17.66 17.60 17.90 17.60 17.88 0.22 37,500
Pioneer Cement 107.40 108.49 109.00 107.90 108.62 1.22 213,800
Power Cement Ltd. 10.43 10.43 10.54 10.40 10.52 0.09 177,500
Safe Mix Con.Ltd 8.50 8.60 8.78 8.60 8.61 0.11 36,500
Thatta Cement 29.50 29.50 29.50 29.50 29.50 0.00 1,000

31. Share Price Sensitivity Analysis
• Company’s share price is directly linked with the operational
and financial performance of Company.
• INCREASE IN DEMAND  Increase Market price of bag  Better
EPS  Increase Share price
• INCREASE IN VARIABLE COST decrease GPM  Lower
profitability and EPS  decrease Share price
• INCREASE IN FIXED COST  Discount rate increase, rupee
devaluation occurs and increase in inflation EPS falls  share
price decrease
• CHANGE IN GOVERNMENT POLICIES  If policy change is +ve
than share price will increases, otherwise vice versa
• GOODWILL  The market share price can also vary with the
investors’ sentiments towards the company which changes very
quickly in response to the news and events and also because of
investors’ following of the general market trend.