In Pakistan, Dandot Cement shuts down plant
Cites financial constraints, environmental conditions behind shutdown
Representational image. PHOTO: REUTERS
KARACHI:
Dandot Cement Company has succumbed to the prevailing slowdown in the cement sector and has shut down its plant owing to financial constraints and enhanced legal environmental conditions.
“The company has been facing serious challenges with respect to viable operations, adequate liquidity and has incurred huge financial losses for the past many years,” said a notification of the company sent to the Pakistan Stock Exchange.
“Furthermore, the current operations of the existing plant are unable to meet the prescribed environmental standards as stipulated by the law.”
Rising inflation, mainly on the back of rupee depreciation against the US dollar, coupled with multiple interest rate hikes by the State Bank of Pakistan, dented the cement sector and enhanced its cost of production manifold.
The notice added that a large amount of fresh capital was required to be invested for comprehensive balancing, modernisation and replacement (BMR) of the project in order to meet environmental standards, achieve energy efficiency with cost effectiveness and convert the process into an automated one to make the company financially viable and legally compliant.
“After the relevant finances are arranged, the project execution will also take more than 12 months as the current plant needs to be dismantled before new equipment can be installed there,” it said. “This entire process will take an indefinite period of time to complete before operations can resume.”
Last year, the company management tried to sell the plant to a Chinese investor but owing to pressure from its workers union, the goal could not be achieved, said a source in the market.
“The company has old technology which needs to be dismantled, therefore, no investor is interested in pouring money into the plant now,” he said. Over the past few years, cement companies have established new production lines and enhanced total capacity of the country to 57 million tons per year, according to data of the All Pakistan Cement Manufacturers Association (Apcma).
“Amidst economic slowdown, the government slashed its development expenditure, which further impacted the cement sector, especially in the northern region where government expenditure created cement demand,” said JS Global senior analyst Karim Punjani.
“On the other hand, the demand in the southern region, which comes mainly from the private sector, has also declined due to the economic slowdown.”
Besides the economic woes, the Katas Raj temple complex issue, in which court held the cement manufacturers responsible for environmental hazards, also contributed to this development. Cement companies close to the area were using an outdated technology in their plants which consumed a huge amount of water causing disturbance to the nearby ecosystem.
“Even earlier, the company was struggling to survive, however, the current economic slowdown acted as a catalyst towards the shutdown and its condition worsened further,” he said.
Published in The Express Tribune, November 5th, 2019.
Dandot Cement Company has succumbed to the prevailing slowdown in the cement sector and has shut down its plant owing to financial constraints and enhanced legal environmental conditions.
“The company has been facing serious challenges with respect to viable operations, adequate liquidity and has incurred huge financial losses for the past many years,” said a notification of the company sent to the Pakistan Stock Exchange.
“Furthermore, the current operations of the existing plant are unable to meet the prescribed environmental standards as stipulated by the law.”
Rising inflation, mainly on the back of rupee depreciation against the US dollar, coupled with multiple interest rate hikes by the State Bank of Pakistan, dented the cement sector and enhanced its cost of production manifold.
The notice added that a large amount of fresh capital was required to be invested for comprehensive balancing, modernisation and replacement (BMR) of the project in order to meet environmental standards, achieve energy efficiency with cost effectiveness and convert the process into an automated one to make the company financially viable and legally compliant.
“After the relevant finances are arranged, the project execution will also take more than 12 months as the current plant needs to be dismantled before new equipment can be installed there,” it said. “This entire process will take an indefinite period of time to complete before operations can resume.”
Last year, the company management tried to sell the plant to a Chinese investor but owing to pressure from its workers union, the goal could not be achieved, said a source in the market.
“The company has old technology which needs to be dismantled, therefore, no investor is interested in pouring money into the plant now,” he said. Over the past few years, cement companies have established new production lines and enhanced total capacity of the country to 57 million tons per year, according to data of the All Pakistan Cement Manufacturers Association (Apcma).
“Amidst economic slowdown, the government slashed its development expenditure, which further impacted the cement sector, especially in the northern region where government expenditure created cement demand,” said JS Global senior analyst Karim Punjani.
“On the other hand, the demand in the southern region, which comes mainly from the private sector, has also declined due to the economic slowdown.”
Besides the economic woes, the Katas Raj temple complex issue, in which court held the cement manufacturers responsible for environmental hazards, also contributed to this development. Cement companies close to the area were using an outdated technology in their plants which consumed a huge amount of water causing disturbance to the nearby ecosystem.
“Even earlier, the company was struggling to survive, however, the current economic slowdown acted as a catalyst towards the shutdown and its condition worsened further,” he said.
Published in The Express Tribune, November 5th, 2019.