Pakistan Today reported that a growth of 3.54% YoY in cement volumes during 5M FY 2012 may not get the investors too excited. However, 38% to 39% YoY jump in net retention prices in FY 2012 and an approximate 8% to 9% QoQ rise in Q2 FY 2012 is a comforting factor for the sector.

Interestingly, and contrary to general expectations, high cement prices have maintained their level in the winter season as well. Another silver lining for the sector has been recent correction in coal prices (down 10% since September 30th 2011) which is likely to help loosen cost pressures, thus boosting margins.

Cement prices refuse to give an inch: Despite the winter chills setting in we have not seen cement prices nudge southwards. In the past, owing to slowdown in construction activity in winters, stronger competition tends to emerge within the sector which had consequently led to a dip in cement prices.

However, during this year (Q2 FY 2012) and last year (Q2 FY 2011), the trend has reversed and prices have risen in order to counter the weak demand. Considering this weak demand outlook (JS estimates 5% to 6% YoY growth in FY 2012), we believe prices are likely to stay relatively strong to sustain profitability of the sector.

(Sourced from www.pakistantoday.com.pk)