#1© The Pakistan Credit Rating Agency Limited The Nation Cement An Overview PACRA March 2021#2Table of Contents Contents Page No. Contents Page No. Large Scale Manufacturing 1 Business Risk 12 Production Process 2 Financial Risk 14 Global Industry 3 Rating Curve 16 Industry Snapshot | Local 4 Duty & Taxes 17 Porter Five Forces Model 18 Supply Side | Cost Break up 5 SWOT Supply Side | Coal 6 Outlook 1920 Supply Side | Production. 7 Demand Side | Local 9 Demand Side | Export Demand Side | Price Dynamics 10 11 PACRA#3Cement Global Industry • • • Overview: Cement is an essential building block of development. The Sector has a huge economic impact due its long and diverse supply chain and contributes ~0.4% to the global GDP and ~7.7% to the world employment. Production: Global cement production is regionally concentrated. Top five countries account for nearly three quarters of the world's cement production which hovers around ~4.3 bln tons and around ~45% of the global capacity is occupied by the top 10 players. China leads with a ~57% share, followed by India (~8%), Vietnam, USA and Indonesia. Globally, more than 1,000 cement producers operate over 2,300 integrated cement plants and 600 grinding stations. Consumption: The global cement consumption has been estimated to decline to ~3.9bln tons in CY20 from ~4.1bln tons in CY19 (a dip of ~5% YoY) owing to the outbreak of covid-19 pandemic. Exporters: Total world cement exports in FY20 were US$ ~11 bln and Vietnam was the largest exporters (~11.5%) followed by Turkey (~7.7%), Thailand (~6%) and Canada (~4.8%). Pakistan's share in world exports of cement in FY20 was ~2.3% and was ranked as the 11th largest exporter in the world. Amid covid-19 crisis, global cement consumption has witnessed a decline across almost all regions except China. Average utilization capacities of cement production have remained around ~70% for five years prior to the advent of covid-19. The utilization levels fell to around 60% in CY20 due to lower production requirements. Nonetheless, global demand is expected to rebound and return to pre-covid levels due to easing of covid-19 induced lockdowns across the major economies. China and Asia are expected to remain the drivers for demand in the short to medium term.#4Cement Global Industry | Top Players . • The cement industry is one of the important sectors globally due to the industry's massive stand alone output and being the essential part of other industries worth trillion of dollars at global scale such as chemicals and constructions. Global cement consumption is estimated around ~4 billion tons, contributing ~0.4% to global GDP and is also one of the largest employer of global workforce. China is the world's largest producer and consumer of cement as it account for ~58% of total global production, which is eight times more than world's second largest producer, India (~8%). Due to high capital intensive nature of the business, the global cement market is dominated by big companies. Top ten largest cement companies have estimated market share of ~50%. Like other industries, covid-19 lock down had serious implication for the cement industry as well, as the sector output is estimated to be reduced by ~6% during FY20. But the demand recovered sharply post covid-19 lockdown. CNBM (China) CRH (Ireland) HCMLF (France) AHCHY (China) Cemex (Mexico) HEI (German) VEBM (Brazil) CARCY (China) TPE (Taiwan) Ultratech (India) 5 Top Ten Cement Companies 10 10 15 20 25 30 35 40 Revenue US$ billion (2019) Source: Yahoo Finance, Global Trade 3 PACRA#5Cement Production Process Mining of raw material Grinding raw material to a fine powder, called a including limestone, clay, gypsum and others. raw meal. Raw meal is heated at a temperature of ~1,450 °C in a cement kiln to produce clinker. Hot clinker exits from kiln will enter the clinker cooler to reduce its temperature from 1450 °C to 100 °C. Cooled clinker mixed with gypsum and other additions, they will be grinded into fine and homogenous powder, cement. Manufactured cement then stored in silos before packaging and sale to end consumers. Source: PACRA Internal Database 2 PACRA#6• Cement Large Scale Manufacturing- Overview PACRA Large Scale Manufacturing (LSM) is essential for economic growth considering its linkages with other sectors. It contributes ~9.5% to Pakistan's GDP. During FY20, the country's overall GDP contracted by ~0.4% on account of the Covid-19 pandemic spread (FY19: Growth ~1.2%). Covid-19 lockdown and overall economic slowdown had severe implication for LSM as well, as its registered negative growth of ~10.17% during FY20 (FY19: (~2.32%)). The government of Pakistan and SBP announced series of incentives during 4QFY20 to support businesses and to stimulate business activity. The stimulus measures yields positive results for the economy, as the LSM posted a growth of ~8.2% during 1HFY21 (6MFY20: (~2.7%)). Agriculture (19%) Crops (35%) Others(65%) Economy LSM (78%) Cement (5.3%) ! Manufacturing (13-14%) SSM (15.2%) Services Slaughtering (6.8%) (67-68%) Source: Pakistan Economic Survey 1#7Cement • • Industry Snapshot | Local Cement is a significantly important sector of the country, and is also vital for its economic development. The country's infrastructural developments and construction activities alongside multiple allied sectors (steel, wood, tiles etc.) are directly influenced by the performance of the cement sector. Overall size of the sector was recorded at PKR~345,054mln during FY20 (FY19: PKR 413,879mln) down ~17% YoY, due to reduced retention prices in the north region amid increased supply and reduced exports. The Cement Sector is composed of 19 companies of which 16 companies and 24 plants are operational. The Sector is divided into two regions; North and South, with North covering areas of Punjab, KPK and AJK and South including areas of Sindh and Baluchistan. The cement sector is organized and oligopoly in nature, with most of the players listed on the PSX. Market capitalization of the sector is recorded around PKR~690bln. Overview Offtake Local mln tons Export mln tons PACRA FY19 FY20 Gross Revenue (PKR mln) Contribution to GDP 413,879 345,054 1.18% 0.85% Sector Players 17 17 Structure Regulated & Listed Production Capacity mln tons 66 66 40 40 7 8 Total Offtake mln tons North Region (Avg Price/Bag) 47 48 580 526 • Overall economic growth and government's spending on development projects are the main drivers of the sector's growth. South Region (Avg Price/Bag) Regulator 621 673 Securities and Exchange • Pakistan's per capita cement consumption is around 182 kg whereas world average per capita consumption is recorded around 500 kg, more than double the consumption in Pakistan, reflecting an immense potential for growth in cement demand. Associations Commission of Pakistan (SECP) All Pakistan Cement Manufacturers Association (APCMA) Source: Pakistan Economic Survey, APCMA, PBS 4#8PACRA Production Capacity 70 100% Cement Supply Side | Production • • Cement sector's production capacity is recorded around ~64mln tons in FY20 (~60mln tons in FY19), an increase of ~7% YoY. Almost ~76% of the operational plants are located in the North Region, while remaining ~24% capacity is located in the South Region. The sector has witnessed some major capacity enhancement rounds in the last two decades, in anticipation of rising momentum of cement demand in the country. The first phase was initiated in FY07, which was completed in FY12, the second phase was announced in FY13 and FY14 against which almost all expansions achieved CoD up till March'20. Lately, top five (5) cement companies have announced expanding their production capacities which would add approximately 18mln tons to the total cement production capacity of Pakistan, taking it up to approx. 81mln tons. The expansions are expected to be completed by FY23-24. The expansion cycles are based on a various number of factors. Recently, promising demand from GoP projects such as Naya Pakistan Housing Program (NPHP), construction of dams, and CPEC related activities have encouraged the sector players to go into expansion. Also, the TERF facility has overall diluted the borrowing cost of projects, making it an attractive opportunity for the players to expand. 60 60 50 40 40 30 20 10 90% 80% 70% 60% 50% 40% 30% 20% 10% 0 0% FY15 FY16 FY17 FY18 FY19 FY20 Production Capacity (MMT) Utilization (%)#9Cement Supply Side | Cost Break up . Major raw materials used in cement manufacturing process are limestone, clay and gypsum. These raw materials, however, constitute a very small portion of the production cost - 4% (as represented in the adjacent pie chart) due to the energy intensive nature of the process, which majorly constitutes fuel and energy cost. PACRA Manufacturing Cost Break up. Raw Material, 4% • Coal, being a cheap source of energy, is extensively used by the cement companies in their manufacturing process and accounts for ~40% of the total production cost of cement. Meanwhile, fuel & power costs also contribute a prominent portion of the total cost of production (~20%). Imported Coal, 39% . Majority of the cement manufacturers rely on imported coal to meet their energy needs, which implies their exposure to exchange rate movements as well as fluctuations in international coal prices. Other Fuel & Power, 20% Fixed Cost & Overheads, 22% Packing Material, 10% Stores & Spares, 4% Source: APCMA, PACRA Internal Database, Companies Financials#10Cement Raw Material | Coal PACRA • Imported coal constitutes ~40% to the total cost of production of the cement sector. Coal Import 20,000 2,000 Coal imports have witnessed an increasing trend over the period due to increased production of cement and coal fired power plants. 15,000 1,500 10,000 Coal imports in FY20 were recorded at USD~1,313mln with YoY decrease of ~14% (FY19: USD~1,538mln), whereas the quantity imported increased by ~5% during the same period. The decrease in import bill despite higher quantities imported in FY20 is majorly attributed to the freefall in coal prices amid Covid-19 outbreak (~23%). Average coal price during FY20 was recorded at USD~67/MT down ~23% YoY (FY19: USD~88/MT). Prices registered a slight downward trend in 1HFY21 averaging around USD~65/MT. Average crude oil price during 1HFY21 was recorded at USD~43/bbl (1HFY20: USD~60/bbl). Crude oil prices are expected to average above USD~55/bbl during 2HFY21. 5,000 100 80 Considering high correlation between crude oil and coal prices, average coal prices are also expected to increase in 2HFY21 in line with the uptick in oil price. FY16 FY17 FY18 FY19 FY20 Coal Import (000 MT) Coal Import (US$ mln) Average Coal and Crude Oil Prices 60 40 20 0 FY16 FY17 FY18 FY19 FY20 1 HFY21 Coal Pirce (US$/Ton) Crude Oil (US$/Barrel) Source: EIA, PBS, Index Mundi 6 1,000 500#11Cement Supply Side | Production • Companies in the South Region have to incur low transportation costs while transporting imported coal from port to their plants. Moreover, due to their close proximity to the port, their access to export markets through sea routes increases in comparison to their northern counter parts. Although the companies in the North Region have to incur more transportation cost, these companies have more access to Afghanistan and Indian market for Export. Company D.G.K Cement, Dewan Cement and Lucky Cement are the only companies that have presence both in North and South Regions. PACRA Production Capacity FY20 Region Production Lines Capacity (000MT) Bestway Cement Limited Askari Cement North 6 9,853 North 3 2,804 Cherat Cement Company Limited Dandot Cement Limited Dewan Hattar Cement Limited D.G.Khan Cement Limited Fauji Cement Company Limited Fecto Cement Limited Flying Cement Limited North 3 4,536 North 1 504 North 2 1,134 North 3 4,221 North 2 3,434 North 1 819 North 1 1,197 Gharibwal Cement Limited North 1 2,111 Kohat Cement Company Limited North 3 5,018 Lucky Cement Limited North 5 6,810 Maple Leaf Cement Factory Limited North 3 5,670 Pioneer Cement Limited North 3 4,550 Total 37 52,660 Attock Cement Pakistan South 3 2,996 Dewan Cement Limited South 2 1,764 D.G.Khan Cement Limited South 1 2,898 Lucky Cement Limited South 4 4,900 Power Cement Limited South 2 3,371 Thatta Cement Limited Total South 1 577 13 16,505 Source: APCMA, PACRA Internal Database 8#12. Cement Demand Side | Local PACRA PSDP and Cement Depatches 45 1,800 • Pakistan's local cement dispatches for FY20 were recorded at ~40mln MTs (FY19: ~40mln MTs). Cement demand is highly correlated to the GOP's spending in development projects through Public Sector Development Program (PSDP). Due to the widening fiscal deficit, PSDP spending has significantly reduced in the past couple of years. Development spending by the GoP was recorded at PKR 1,155bln during FY20 as compared to PKR~1,584bln in FY18 with a cumulative decrease of ~28%. 40 40 35 30 25 Despite declining PSDP, local cement dispatches averaged around ~40mln MTs in the last three years supported by CPEC related projects and increase in local construction activity. 20 . To stimulate construction activity, the GoP has announced a construction relief package of PKR~100bln during FY20. The package includes tax incentives, waivers and subsidies for builders, developers and property owners. According to industry experts, one of the main incentives of the package is that one that does not require people to declare their sources of income before investing in construction related projects, which will increase private investment in construction related projects substantially. 15 10 5 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 Cement Dispatches (MMT) PSDP (PKR billion) 1,600 1,400 1,200 1,000 800 600 400 200 Source: APCMA, Constructech, Economic Survey, Dawn 9#13Cement Demand Side | Export PACRA • Pakistan exported 7.847 MMT of cement and clinker during FY20 (FY19: 6.541 MMT) up ~20% YOY basis. Major Export Market (000 MT) 5,000 4,000 • . • • Historically, Afghanistan and India were major cement export markets for Pakistan. Heavy duty on Pakistan goods were imposed by Indian government in FY19 amid high political tension between both countries which led to a suspension of Pakistan's cement exports to India. Export of cement to South Africa through sea routes was also decreased substantially after the imposition of anti-dumping duty by South Africa on Pakistan's cement products in FY16. Export of cement to Afghanistan have also decreased over the period due to influx of cheaper Iranian cement into the country. On the contrary, Export of clinker to Bangladesh has grown substantially in the past couple of years, as Bangladesh's cement industry relies on imported raw material due to non-availability of raw material for cement locally. Bangladesh's share constitutes ~76% of the total clinker exported by the country during FY20 (FY19: ~86%). 15,000 10,000 5,000 3,000 2,000 1,000 LILIL FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 Afghanistan India ■Bangladesh Other Export Mix (000 MT) FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 Cement Clinker Source: APCMA, 10#14Cement • Demand Side | Price Dynamics PACRA Cement prices are a function of the market demand supply dynamics. Variations in prices are generally dependent upon the behavior of major cost components of cement production, including coal prices, exchange rate, fuel costs and freight charges. Export of cement to Indian market stopped after the imposition of heavy duty on Pakistani products by Indian government at start of FY20. Decreased exports coupled with increased capacity in the north region increased pressure on the prices. Price in the region remained further under pressure after the imposition of covid-19 lock down in last quarter FY20. Uptick in construction activities post covid-19 lock down supported the cement prices. In the wake of improve capacity utilization, the prices in the are expected to remain stable in the 2HFY21. As mentioned in table below, clinker is exported at very low price as compare to cement despite being advanced stage product, if not finished good. Export of clinker is not very profitable for the companies on stand alone basis but it come with other additional benefits like increased capacity utilization and availability of export refinance facility at subsidized rates. Price Trend (PKR/bag) Comparison of Local and Export Prices Avg Prices in PKR/bag FY17 FY18 FY19 FY20 North 800 700 600 500 South 400 Export Clinker 300 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Export Cement -North Region South Region 539 527 581 526 576 586 619 673 405 318 391 397 457 451 525 546 Note: Export prices are adjusted for sales tax, FED and others. Source: APCMA, PBS 11#15Cement • • Business Risk Total revenue of the sector was recorded at PKR~241,538 million during FY20 (FY19: PKR~289,715 million) with YoY decrease of ~17%. Low retention prices during FY20 amid high competition led to decrease in sector's revenue despite ~2% increase in total dispatches. FY20 has been a tough year for the Sector in terms of pressure on the margins on account of rising exchange rate, interest costs (for most part of the year) and subdued demand. GP margins plunged to as low as ~5% from ~22% in FY19. The benefit of low average coal prices during FY20 was eroded by high average exchange rate during the period. Bottomline of the Sector also turned negative as a consequence of shrunk demand and increased costs. Despite the dip, the Sector's indicators have turned around well in 1HFY21 with GP margin recording a ~27% growth during 1HFY21. Increased retention prices, low coal prices and stable exchange rate during 1HFY21 are the major contributors. Sales Cost of Sales Gross profit 50% 40% PACRA Figures in PKR mln Company Sector: Financial Highlights Operating Expense Operating Profit Finance Cost 12,008 88,228 3,480.0 Profit/(Loss) before Tax Taxation Profit/(Loss) after Tax FY16 FY17 FY18 FY19 226,908 246,538 258,349 289,715 126,672 151,347 181,004 224,575 100,236 95,191 77,345 65,140 12,872 14,243 13,695 82,319 63,102 51,445 2,379 3,001 9,084 84,748 79,940 60,101 42,361 25,538.0 23,022 5,669 8,770 59,210 56,918 54,432 33,591 FY20 1HFY20 1HFY21 241,538 132,433 167,734 229,982 125,245 129,999 11,556 7,188 37,735 11,440 116 575 17,815 9,603 1,572 (17,699) (9,028) 2,021 (4,700) (2,705) 9,729 (12,999) (6,323) 28,006 6,613 4,219 5,959 30% 20% 10% 0% FY16 FY17 -10% Gross Profit Sector Profitability FY18 FY19 Operating Profit Net Profit FY20 1HFY21 Source: APCMA, PBS, Companies Financial, PACRA Internal Database 12#16Cement • • • Business Risk-Outlook • With a widened fiscal deficit, the PSDP spending has narrowed in the recent years and is expected to continue at the same average. On the other side, the sector's production capacity is continually jacking up in anticipation of ambitious initiatives such as NPHP, construction package and CPEC. Private investment in construction activities is crucial in this scenario for the sector's revenue. With dispatches picking up at a healthy pace, capacity utilization levels are expected to improve in FY21 supporting cement bag price. Also, with the strengthening of crude and coal prices in International markets, the manufacturers are expected to raise their prices likewise in order to keep their margins intact. Coal prices are expected to remain rangebound in FY22 and FY23. The sector's profitability is highly sensitive to change in prices. As per estimates, with other factors constant, a decrease of over PKR~60/bag in average retention prices has the potential to erode the operating profitability of the sector. Sensitivity Analysis Figures in PKR mln (*except price/bag) Change in Interest Rate PACRA 1% 2% 3% Impact on Profitability Percentage of Sector's Operating Profitability 2,014 4,027 6,041 4% 7% 11% Change in Price/bag -PKR (Local) 30 60 90 Impact on Profitability 28,331 56,662 84,992 Proportion of Sector's 51% 101% 152% Operating Profitability Note: Profitability of the sector in 1HFY21 is extrapolated for calculations. Currently, interest rates are at historically low rates, as SBP slashed down interest rates from 14% to 7% as a proactive measure for support in Covid-19 environment. The cement sector has benefited substantially from the low interest rates, which may increase in the coming periods as the economy heads towards stabilization. Source: APCMA, PBS, Companies Financial, PACRA Internal Database 13#17Cement PACRA • • • Financial Risk-Working Capital The sector's working capital (WC) days were recorded at ~85 during FY20 (FY19: ~78 days) mainly due to increase in receivable days - ~14 days in FY20 (~11 days in FY19). The sector experienced delays in payments due to halt in production activity in 4QFY20 after the imposition of Covid-19 lock down. The resumption in construction activities post Covid-19 lock down resulted in revived construction activity in the country. Eventually, inventory days reduced substantially from ~108 days in FY20 to ~98 days in 1HFY21. Reduced inventory days results in improved working capital cycle of the sector as the WC days of the sector reduced to ~73 days in 1HFY21 from ~84 days in FY20. 120 100 80 60 60 40 40 20 0 Working Capital Management JJJJJJ FY16 FY18 FY17 FY19 Payable Days ■Receivable Days I Inventory Days Working Capital Days FY20 1HFY21 Source: APCMA, PBS, Companies Financial, PACRA Internal Database 14#18Cement Financial Risk - Borrowings . PACRA According to the SBP Report, total borrowing book of the cement sector clocked in at PKR~185bln as at End-Feb’21, i.e., ~50% of the Sector's revenue in FY20. The capacity expansion cycles are majorly financed through external debt, which results in the sector's borrowing book to increase. Almost ~60% of the Sector's borrowings are, therefore, long term in nature. The Sector is moderately leveraged (~47%). A leverage ratio ranging between 45%-50%, despite hefty CAPEX and debt financing, reflects good capital formation. With new capacity enhancement on cards, the Sector's leverage ratio may slide up in the coming periods, owing to additional long term debt financing needs. Gearing Ratio 60% 51% 50% 47% 40% 44% 30% 35% 20% 19% 20% 10% 0% FY16 FY17 FY18 FY19 FY20 1HFY21 Borrowing Mix as at end 1HFY21 3% 9% 3% 26% 58% ■ Export Financing ■Import Financing ■Short Term Borrowing ■Long Term Borrowing ■ Other Source: APCMA, PBS, Companies Financial, PACRA Internal Database, SBP 15#19Cement Rating Curve • PACRA rates 9 clients in the cement sector. Rating bandwidth of the sector is A- to AA-. • Collectively PACRA rated clients makeup ~60% of the total sector in terms of its production capacity. Number of clients 5 m N 1 PACRA Rating Universe 0 BBB+ A- A A+ AA- AA AA+ Rating Curve PACRA Source: PACRA Internal Database 16#20Cement Duties & Taxes Description Additional Custom Custom Duty Federal Excise Duty Sales Tax Income Tax Duty PCT Code Raw Material for FY19 FY20 FY19 FY20 FY19 FY20 FY19 FY20 FY19 FY20 Cement 2701.1200 Bituminous Coal 3% 3% 2% 2% 2701.1900 Other Coal 3% 3% 2% 2% 17% 17% 11% 11% 17% 17% 11% 11% PKR PKR 2523.1000 Cement Clinker 11% 11% 2% 2% 17% 17% 11% 11% 150/Ton 150/Ton Finished Goods FY20 FY19 FY19 FY20 FY19 FY20 FY19 FY20 FY19 FY20 Building Block and 6810.1100 20% 20% 7% 7% Bricks 17% 17% 11% 11% PKR PKR 2523.2100 White Cement 20% 20% 7% 7% 17% 17% 11% 11% 150/Ton 150/Ton 2523.2900 Other Cement 20% 20% 7% 7% PKR 150/Ton 150/Ton PKR 17% 17% 11% 11% . PACRA Duty structure of the sector is designed to encourage local production of the cement. To support local demand, FED on local cement reduced from PKR 100/bag to PKR 75/bag during the period. Source: PACRA Internal Database 17#21Cement Porters 5 Forces Model 15 POTENTIAL NEW ENTRY BUYERS . 殆 Low threat to Entry High Capital cost of plant development • Extensive regulatory • requirement to establish new plants Strong dealer • Medium to high • Abundance supply Homogeneous nature of the product • SUBSTITUTES No/Low threat of substitutes Indispensable component of construction network of established players PACRA SUPPLIERS COMPETITIVE RIVALRY 213 . Low power Abundance supply of basic raw material • Heavy rely on imported coal comes with its set of challenges • • High Capacity enhancement amid stagnant demand increases competition 18#22Cement SWOT Analysis • Abundance local availability of basic raw material • Low cost skilled and unskilled labor Capital intensive sector Characterized by good margins in period of robust demand • Demand Potential • Strong dealership and distribution network • Non-availability of substitute High level of competition • Increasing cost of energy •Reducing PSDP spending in a wake of increasing fiscal deficit • Rising environmental concerns related to production of cement • Competition in export markets with cheaper Iranian cement ⚫Third wave of covid-19 lockdown and possible lock down Strengths Weaknesses Threats Opportunities PACRA • Reliance on depleting natural resources • Heavy reliance on imported coal • Exposure to exchange rate volatility •Extensive regulatory requirements • Supply-Demand gap • Inability to pass on increased cost of production to end consumers • Low per capita consumption . Government initiatives to spur construction activities and establish a large number of low cost houses. • Uptick in construction activities • Pakistan GDP recovery and reduced finance costs leading to opportunities for investment • Improving infrastructure under CPEC related projects 19#23Cement Outlook: Stable • • • Post covid-19 lockdown, the cement dispatches has shown significant growth. Total dispatches are expected to register more than ~20% YOY growth during FY21 on account of low base effect and increase in construction activity. During FY21, the government has announced construction package along with other regulatory relaxations to support spur construction activity. These measure are yielding positive results as the sector has shown positive growth since then. Recently, many cement players has announced capacity expansion, the production capacity of the sector is expected to cross ~80 MMT in 2023. Amid low PSDP spending growth in local consumption from private consumers would be crucial for the sector. The sectors profitability is highly sensitive to change retention prices, low capacity utilization usually increase competition amongst local players and hence reduce the retention prices. PACRA The sector has been benefitted from low interest rate and low coal prices during 1HFY21. Interest rate are expected to increase in coming periods and average coal prices are also expected to increase in 2HFY21 as compare to 1HFY21. Both these changes will have a negative impact on sector's profitability. The growth in export of clinker to Bangladesh is expected to remain robust owing to growing economy of the country and non- availability of indigenous raw material locally. Whereas, the export of cement to Afghanistan is expected to remain under pressure owing to influx of cheaper Iranian cement. 20#24Cement Bibliography . National Fertilizer Development Centre (NFDC) Research Team Saniya Tauseef Asst. Manager [email protected] Contact Number: +92 42 35869504 PACRA Muhammad Nadeem Sheikh Supervising Senior [email protected] DISCLAIMER PACRA has used due care in preparation of this document. Our information has been obtained from sources we consider to be reliable but its accuracy or completeness is not guaranteed. The information in this document may be copied or otherwise reproduced, in whole or in part, provided the source is duly acknowledged. The presentation should not be relied upon as professional advice. 21