Thatta Cement to double production capacity

KARACHI: The Thatta Cement Company Limited has planned to increase its production capacity to 3,000 tons per day from the current 1,500 tons. The proposed installations include a clinker plant and facilities for grinding cement.

Official sources have said that the management of the company will present the expansion plans for approval during the Board of Directors meeting scheduled to be held in October. If given the green signal by directors, it is expected that the Rs3 billion extension project will be completed within 24 months.

Senior management of Thatta Cement has predicted a growth in demand for cement in both domestic and international markets. Officials believe that the intended expansion will help the company reap benefits of increased demand in coming years as the global economy recovers from its current slump.

They claim that the growing eastern economies, such as Sri Lanka, are likely to provide good export avenues in coming years.

However, some analysts were critical of the plans to increase production capacity. “Export avenues for Pakistani cement exporters are shrinking. The traditional Middle Eastern markets have been saturated by other countries and growth prospects seem bleak going forward,” said a cement sector analyst, Usman Zahid.

He also commented that the growth in domestic demand could be catered to by existing production facilities.

Experts have estimated that currently the demand for cement in the local market stood at around 23 million tons, whereas the country has a total installed capacity of about 36 million tons.

Cement prices rise for the second day in a row

Cement is being sold for Rs325 per bag in retail markets after the latest price increase of Rs10 per bag. The hike has been attributed to a rise in ex-factory prices of cement and an increase in transportation costs.

A representative of the cement manufacturers association, Brigadier Niazi, told The Express  Tribune that the ex-factory price of cement had increased by about Rs200 to settle at Rs5, 800 per ton last week. Tuesday’s rise took ex-factory prices up to Rs6,000 per ton.

“Cost of transportation and cost of doing business for retailers have increased on the back of rising fuel prices and electricity tariffs,” said Niazi. He also pointed out that the cost of production would go up further since coal prices were increasing in international markets.

However, analysts have said that the successive price hikes were sudden and completely unexpected. “Given the extremely high sales volumes, cement companies tend to benefit a lot from these increases,” commented one analyst.

He estimated that an increase of Rs10 per bag could translate into an additional Rs1.6 in earnings per share (EPS) of Lucky Cement. Similarly, the EPS for Dera Ghazi Khan Cement and Attock Cement could also increase by Rs1.75 and Rs1.85 respectively.

He was of the opinion that the increase in prices would help cement companies improve their income statements ahead of announcing next quarter’s financial results.

Published in The Express Tribune, July 14^th, 2010.