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Business Recorder
24-06-2025
- Business
- Business Recorder
Cement woes
This was a challenging year for the cement industry, mostly because of absent domestic demand. In 11MFY25, sales dropped 2 percent from a rather weak last year. This year's performance is 6 percent below industry volumes during FY23, and nearly 20 percent lower than volumes sold during FY22. At the time, the industry also made impressive profits as for the first time in many years, prices went up rather quickly. In the north zone, prices surged 30 percent while in the south, cement prices rose 25 percent. Since then, not only have prices skyrocketed, demand has continued to slid down. In the north, prices went up,averaging at Rs744 in FY22 to crossing Rs1000 in FY23, Rs1200 in FY24, and Rs1400 now in FY25. Southern prices have follow4d a similar trajectory, though they tend to be comparatively more stable. The other thing that changed was prices in north ovetook southern prices in FY23. Northern markets have maintained that differential since then. Prior to FY23, prices in the south were always higher than the north. Demand has been fairly erratic. Fluctuations in international coal prices, and often currency depreciation forced cement manufacturers to raise pricesafter FY21. South prices were always higher then due to higher competition in the north. But first came massive demand that made manufacturers more comfortable raising prices, then came crippling inflation that made it impossible to keep going without keeping prices up. In FY25, prices have not been as volatile but they have never really dropped significantly enough. Demand has been unforgiving. In fact, it was improved prices that allowed cement companies to turn decently positive financial performance. The second helper was exports. In 11MFY25, exports grew 26 percent and contributed to roughly 20 percent of the sales mix. This is the highest exports share in the past decade. Moving into FY26, demand may improve if PSDP disbursements keep coming and keep coming on time. When fiscal pressures intensify, the first line of defense is to cut on development spending. It's a time bound tradition. On the upside, the government's upcoming mark-up scheme for mortgages could resuscitate home construction demand which will breathe new life into the sector- at least for a little while. The construction material manufacturers will have that to look forward to. Even though demand is sure to grow in the fiscal year, even if it slows down later in FY26, if cement companies are able to keep prices sticky up, they will coast on their back fairly easily. The rub might come in the form of reduced export demand which is the perfect fallback plan for cement makers when domestic markets are weak. That may prove more trouble than it's worth.
Business Recorder
20-06-2025
- Business
- Business Recorder
Cement price dynamics
Cement prices have been on a whirlwind and consumers should get used to it, if they haven't already. Once again after weeks of staying between Rs1400 and Rs1450, prices are set to increase substantially. This time the hike will be limited to Punjab which has had quite a turbulent year. This story begins in the summer of 2024, not 2025. Cement companies located in Punjab and KP at the time were having a blastselling cement at their historic peak prices. Cities like Lahore saw cement prices reachRs1600 per bag while other markets such as Gujranwala and Sialkot saw prices go up to was not a sudden occurrence. Prices were going up consistently for several months despite reduced demand and shrinking capacity utilization. For north players—both from Punjab and KP—the price increase was faster than companies located in the south. After the excise duty increase last year, prices kept surging week after week before reaching their peak in August and September. It wasn't until the end of the year that prices began to ease, remaining volatile for much of the year. During this entire time, southern markets had near constant prices with barely any nudges in either direction. In fact, for much of last year, cement prices in the south—Karachi, Hyderabad, Sukkar, Larkana—contributed little to the volatility of average cement prices. Nearly all southern markets hit their peak as recent as the past 4 weeks. Now markets in Punjab will follow suit. The government announced an increase in royalty last year—around the same time as the region reached its peak prices—but the companies were able to attain a temperory stay with the court. The Lahore High Court has reached a verdict upholding the provincial government's decision to hike the royalty on limestone at 6 percent of the sale price of cement. This will hit companies in the north substantially. If these companies are unable to increase prices at desirable levels—given also that other regions are not facing the same increase in raw material costs—they may also suffer a loss to their margins compared to companies located in KP or Sindh. The cement industry has faced an acute dearth of demand in the past two years. While the upcoming year may change that, given higher development spending and prospects of a subsidy scheme for new mortgages, cement prices play an indomitable role in how well companies perform financially. How astutely they set prices will determine companies in Punjab be able to absorb the higher cost and still make strong margins in the upcoming year as competition for market share grows?
Express Tribune
19-03-2025
- Business
- Express Tribune
Underperforming depts drain resources
If two people can finish a job in a given time frame, having more people work on the same task will gradually lower the overall productivity of the organization. In Punjab, a similar situation is at play with several unnecessary state departments only burning taxpayers' money. The Punjab government has decided to restructure government departments after identifying institutions that were either running in losses or were doing the same work separately. It is believed that the move will improve governance and reduce the provincial budget. In this regard, Chief Minister Maryam Nawaz established a 14-member high-level restructuring committee, tasked with preparing recommendations within 60 days. Senior Provincial Minister Maryam Aurangzeb was appointed as the Chairperson of the committee, with the Finance Minister and Law Minister included among its members. However, sources have revealed that due to the committee's sluggish pace, progress on the endeavour has not met the Chief Minister's expectations, with only a few departments restructured and others still in consideration. As of now, the committee has held just two meetings for reviewing the performance of various departments. According to sources of The Express Tribune, there are a total of 41 government departments operating in Punjab, where more than Rs1400 billion are spent annually on government employees. Various proposals are under consideration for merging underperforming government departments, however, so far, only one merger has been achieved. The Food, Industry & Commerce, and Agriculture departments were reviewed and merged to establish a new department, Price Control & Commodities Management. In the meanwhile, proposals to merge other departments remain pending. These include Bait-ul-Mal, Auqaf and Religious Affairs, and Zakat and Ushr. Similarly, the Education and Health departments can also be merged. Apart from this, mergers of other departments, which are bearing double expenses by appointing double secretaries, are also under consideration. Dr Kaiser Bengali, an economist, was of the opinion that once a government department had fulfilled its role it should be abolished however, this rarely happened since the department was dragged along unnecessarily, allowing the state's financial burden to grow. "Ideally, government departments should be reviewed every ten years so that their activities can be continued or abolished based on their effectiveness. However, there is no such practice in our federation and provinces to review government departments and restructure or abolish them when they are no longer needed. Furthermore, it is often the case that two departments are doing the same kind of work therefore, it is best to merge them and save money," noted Dr Bengali. While the consolidation of powers from various institutions into one department aims to streamline operations, sources from the Finance Department have claimed that the committee's recommendations will lead to the closure of underperforming and loss-making institutions by the new fiscal year, reducing the financial burden in Punjab. When inquired about the government's progress in the restructuring of departments and the expected savings, Punjab's Finance Minister Mujtaba Shuja-ur-Rehman stated that work was ongoing in departments like Education, Health, and Labour. "It is estimated that the results of the restructuring will entail annual savings amounting to Rs8 to 10 billion. Furthermore, reassigning surplus employees, numbering in thousands, to other departments will utilize their labour efficiently," commented Shuja-ur-Rehman. When contacted, the Finance Minister refused to comment on the matter since work was still ongoing and underperforming departments were in the process of being merged with other departments.
Express Tribune
19-03-2025
- Business
- Express Tribune
Underperforming departments drain state resources
If two people can finish a job in a given time frame, having more people work on the same task will gradually lower the overall productivity of the organization. In Punjab, a similar situation is at play with several unnecessary state departments only burning taxpayers' money. The Punjab government has decided to restructure government departments after identifying institutions that were either running in losses or were doing the same work separately. It is believed that the move will improve governance and reduce the provincial budget. In this regard, Chief Minister Maryam Nawaz established a 14-member high-level restructuring committee, tasked with preparing recommendations within 60 days. Senior Provincial Minister Maryam Aurangzeb was appointed as the Chairperson of the committee, with the Finance Minister and Law Minister included among its members. However, sources have revealed that due to the committee's sluggish pace, progress on the endeavour has not met the Chief Minister's expectations, with only a few departments restructured and others still in consideration. As of now, the committee has held just two meetings for reviewing the performance of various departments. According to sources of the Express Tribune, there are a total of 41 government departments operating in Punjab, where more than Rs1400 billion are spent annually on government employees. Various proposals are under consideration for merging underperforming government departments, however, so far, only one merger has been achieved. The Food, Industry & Commerce, and Agriculture departments were reviewed and merged to establish a new department, Price Control & Commodities Management. In the meanwhile, proposals to merge other departments remain pending. These include Bait-ul-Mal, Auqaf and Religious Affairs, and Zakat and Ushr. Similarly, the Education and Health departments can also be merged. Apart from this, mergers of other departments, which are bearing double expenses by appointing double secretaries, are also under consideration. Dr Kaiser Bengali, an economist, was of the opinion that once a government department had fulfilled its role it should be abolished however, this rarely happened since the department was dragged along unnecessarily, allowing the state's financial burden to grow. 'Ideally, government departments should be reviewed every ten years so that their activities can be continued or abolished based on their effectiveness. However, there is no such practice in our federation and provinces to review government departments and restructure or abolish them when they are no longer needed. Furthermore, it is often the case that two departments are doing the same kind of work therefore, it is best to merge them and save money,' noted Dr Bengali. While the consolidation of powers from various institutions into one department aims to streamline operations, sources from the Finance Department have claimed that the committee's recommendations will lead to the closure of underperforming and loss-making institutions by the new fiscal year, reducing the financial burden in Punjab. When inquired about the government's progress in the restructuring of departments and the expected savings, Punjab's Finance Minister Mujtaba Shuja-ur-Rehman stated that work was ongoing in departments like Education, Health, and Labour. 'It is estimated that the results of the restructuring will entail annual savings amounting to Rs8 to 10 billion. Furthermore, reassigning surplus employees, numbering in thousands, to other departments will utilize their labour efficiently,' commented Shuja-ur-Rehman. When contacted, the Finance Minister refused to comment on the matter since work was still ongoing and underperforming departments were in the process of being merged with other departments.
