Possible acquisition: Fecto Cement eyes stake in DCL

Has decided to participate in the bidding for sale of assets at northern plant

Farhan Zaheer December 13, 2016
Exports, however, drop by 1.96% in the month. PHOTO: REUTERS

KARACHI: After Lucky Cement and a Chinese investor, Fecto Cement has now shown interest in acquiring stakes in Dewan Cement Limited.

According to a company notice sent to the Pakistan Stock Exchange (PSX) on Tuesday, the Board of Directors at Fecto Cement has decided to participate in the bidding of sale of assets of Dewan Cement (north plant).

Analysts say domestic cement players have been operating at their optimum capacities, but the growing cement demand is now pushing them to expand their operations to meet current as well as future demand.

Fecto Cement has replaced certain equipment that has resulted in increased production of clinker from existing 2,600 metric tons per day to 2,760 metric tons per day while cement production as increased to 2,900 metric tons per day from 2,730 metric tons per day, the notice added.

Last week, Lucky Cement announced that it is considering to initiate due diligence to evaluate potential acquisition of north plant of Dewan Cement which is located in Hattar, district Haripur, Kyber PakhtunKhwa.

Moreover, on September 23, Dewan Cement announced that a Chinese investor had shown interest in due diligence to acquire stake in the company.

“Lucky and Fecto Cement’s interest in Dewan Cement shows that domestic players want to keep local market in their hands instead of letting it go to a Chinese investor because it may hurt the existing cartel of cement companies,” Sherman Securities analyst Sadiq Samin told The Express Tribune.

Dewan Cement

Dewan Cement has a production capacity of around 2.88 million tons per annum, constituting 6.1% of the total installed capacity of 45.6 million tons of the cement industry. It has two manufacturing units including Pakland Cement and Saadi Cement.

Dewan Cement plants are old and analysts say the new investors would need to install new machinery which would take a year or two. Analysts suggest that the situation would have been different if Dewan Cement had new plants and the new company could immediately start manufacturing cement after taking it over.

Pakland Cement was established in 1981 at Deh Dhando in Malir district, Karachi. The plant was fully operational by 1985 and producing Ordinary Portland Cement.

Anticipating further growth in demand, cement companies are aggressively engaged in expansion of their plants.

Cherat Cement, Attock Cement, DG Khan Cement and Lucky Cement have already announced expansion plans and these plants will come online over the next three years. The combined investment by these players is expected to be in the range of $700 million to $1 billion.

The construction sector, a major consumer of cement, posted an excellent 13% growth in fiscal year 2015-16 compared to average growth of 4% in the past four years due to economic recovery and the booming real estate sector, according to the Pakistan Economic Survey 2016.

The government expects construction-related activities to pick further momentum on the back of increasing public sector development spending coupled with massive infrastructure and power projects under the China-Pakistan Economic Corridor (CPEC).

Published in The Express Tribune, December 14th, 2016.

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