Lucky Cement to set up new 1.25m-ton plant in Karachi

Development will help the company regain its place as market leader

KARACHI: Lucky Cement on Friday announced its intention to expand its current capacity in the south by installing a plant of 1.25 million tons per annum at the existing plant site in Karachi.

This is expected to help the company take back the title of Pakistan’s largest cement producer, which it lost to Bestway Cement in 2015 when the latter acquired Lafarge Pakistan Cement.



According to a company notice sent to the Pakistan Stock Exchange (PSX), the expansion will be made with an investment of $30 million (Rs3.2 billion).

This will be in addition to the earlier announced capacity expansion of 2.3 million tons per annum - expected to be commissioned by fiscal year 2019 - in Punjab, where plants of 37-million-ton capacity (81% of country’s capacity) are situated.



The industry’s capacity in the southern region is expected to increase to around 10 million tons.

After these two expansions, the total production capacity of Lucky Cement will increase from the existing 7.8 million to 11.3 million tons.

“As per our estimates, the Karachi expansion of 1.25 million tons is likely to add around Rs8-9 per share (around 14%) to Lucky’s bottom-line and can potentially come online in the next one and a half years,” Topline Securities said in its report.

Earlier, the CEO of Lucky Cement stated that with an expected local cement consumption growth of 15% for at least the next couple of years, the company planned to take its combined capacity of around 10 million tons per annum (7.75 million tons domestic and 2.1 million tons international) to 15 million tons by 2020, the report said.



Analysts say Lucky is not ready to lose market share in the southern region which is why it has announced the capacity expansion.

According to a report of JS Research, the company’s expansion is motivated by rising demand in the southern region due to fast-track developments at Gwadar Port and the desire to maintain market share after the entry of DG Khan Cement’s 2.6-million-ton production line.

“Our calculations suggest that the company’s market share will jump to 20% from 17%,” the report added.

Published in The Express Tribune, July 30^th, 2016.

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