Exports, however, drop by 1.96% in the month. PHOTO: REUTERS
The new plant would have an annual production capacity of 2.1 million tons, taking the company’s total output to 4.5 million tons a year - about 10% of the current installed production capacity in Pakistan.
The company was already working on its second production line that would have a capacity 1.3 million tons, which was expected to come online in the second half of 2016-17.
Cherat Cement’s latest expansion plan will be entirely financed by debt, costing close to Rs13 billion, according to JS Research. The financial close is expected in the next couple of weeks and the production line may become operational by the second half of fiscal year 2020. The company also intends to bring another Waste Heat Recovery along with the new line, according to the JS Research report.
“The company’s decision to expand further will play a major role in maintaining its market share post commencement of other cement lines,” the report added.
Cherat Cement’s share price rose 0.2% on Monday, closing at Rs192.59 on a bullish day at the bourse that saw the KSE-100 index finish at a record high of 49,876, up 511 points or 1.04%.
“Amid buoyant demand in the local market, we expect Cherat Cement will have a positive impact in current growth scenario in the cement industry,” Summit Capital report said Monday.
Latest in the mix
This is the second such announcement in the cement sector in January alone.
Last week, Arif Habib Group’s Power Cement announced to add a new production line of 2.47 million tons with an investment of $235 million.
Cherat, Attock, DG Khan and Lucky Cement have already been working on expansions that will gradually come online in the next two years. The cumulative expansion of these four production lines is 6.3 million tons. By adding the two latest expansion announcements, a whopping 10.87 million tons have been planned to be added to Pakistan’s cement industry.
“Cement demand is growing in Pakistan and it is expected that the China-Pakistan Economic Corridor (CPEC) will further increase its pace,” Power Cement Chairman Nasim Beg told reporters last week during the cement plant visit.
Beg also said that the industry’s production capacity is expected to increase by another 20 million tons, taking the total output to over 65 million tons from the current level 45.6 million.
Some industry officials and analysts believe that domestic cement demand in Pakistan is continuously growing due to CPEC projects.
However, Beg believes cement demand was already growing even before CPEC was launched in full swing.
Industry officials say the cement industry is current investing at least $700 million to $1 billion in expansions. By adding the recent two announcements of approximately $350 million, the level of investment in the cement industry goes up from $1.05 billion to $1.35 billion in the last two years alone.
Published in The Express Tribune, January 24th, 2017.
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