Pakistan Cements: Due to slight lower than expected cement sales in Mar 2015 led by weak cement exports and higher rains in northern Pakistan, we have revised our FY15 total sales estimate.

We now expect total volumetric sales to grow by 3.2% in FY15 versus our previous estimate of 6.6% (FY14 sales growth was 2.4%).

We remain upbeat on the local sales outlook as strong macros, we believe, will generate construction activities in the country. With average GDP likely to grow at 5.5-5.6% in next the 2 years (FY16-17), local cement sales are expected to grow on average by 9.4% a year to reach 34.1mn tons per annum by FY17. Exports, however, will remain flat at 6.9mn tons per annum.

Additionally, higher disposable income, due to lower inflation (4.7% expected for FY15), should increase private sector expenditure on construction and housing, as evident from mega housing schemes launched by Bahria, Fazaia, DHA and UAE’s Emaar.

Moreover, planned construction of commercial projects and large/medium-sized dams will create incremental cement demand.

Moreover, with supply and demand situation to come at equilibrium by FY17, we expect cement prices to remain intact as capacity utilization level of the industry will reach 92% to 41mn tons, growing a 3-year (FY15-17) CAGR of 6%.