External risk factors

■ Competitors may expand and increase supply in Azerbaijan

– Norm cement has potential to double its cement from 2m TPY to 4m TPY. Although no information is available on their expansion plans, they can achieve it if market expands rapidly

– With the expansion of Norm, Gazakh Cement is also expanding. These two major companies will lead to increased supply in the country, which will be followed by decreased prices

– Increased supply in the economy may result in capacity underutilization. If Gazakh Cement Plant fails to achieve exporting its product to Georgia, the cement producing business activity may face profitability decrease

■ Bargaining power of imports from Iran

– Iran will create a challenge for all market participants in southern regions of Azerbaijan. All three major cement plants are targeting customers who can afford high quality cement. Low quality of Iranian cement will allow them to keep their niche of market who can afford low quality products only. It is very sensible for market assumptions as we currently assume that all new supply will be distributed first on the local market

– On top of this, Iranian exporters require less documentations, if they even do, which is their competitive advantage over all major cement producers in Azerbaijan

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