Lahore October 4 2022: Pakistan third largest cement player, DG Khan Cement Limited (DGKC), foresees intense price competition amid squeezing demand and higher commodity prices.
“The Government has reduced Federal PSDP by 19.2% and also suspended disbursements for the new loans under the low-cost housing scheme. Cement demand mainly stems from infrastructure projects, low-cost housing schemes, and CPEC projects” says DG Khan Cement Chief Executive Officer Raza Mansha.
He added, “The gross margins of the cement industry are likely to decline in FY23 amid elevated coal prices, along with an upward revision in power and a likely surge in gas tariffs, exchange rate devaluation and high inflation numbers. It is expected that the cement industry may likely transfer any cost pressure arising out of it to its customers.”
Raza Mansha shows concern that, “Expansions announced by major companies in the industry will increase the production capacity. However, as the new capacities come online there is a fear of intense price competition scenario on the back of uncertain economic situation.”
“A higher finance cost rate and 4% additional super tax will also hamper the net profitability of the company. However, in order to keep production costs in check, the cement industry has been mixing other sources of coal in their fuel mix.” says Company Chief Financial Officer Inayat Ullah Niazi.
Pakistan is in the midst of a humanitarian disaster after extreme flooding prompted by climate change and monster monsoon rain this summer has led to a staggering number of casualties and damage, as well as stunning infrastructure collapses throughout the country. Thousands of kilometres of roads, bridges, number of buildings and residential houses have been entirely destructed.
CFO further said that, “We may see a huge demand for construction materials for the restoration and rebuilding of the entire damaged infrastructure in the near future.”