Al-Abbas not interested in Attock’s price offer

KARACHI: Attock Cement has announced that it has discontinued its plans to acquire Al-Abbas Cement because of disagreement on the offered price. Negotiations between the two companies for the acquisition of majority shares of Al-Abbas Cement Industries Limited have been terminated and Attock Cement is not interested in buying the cement factory anymore, according to a notification from Attock Cement.

Analysts are assuming that the bid was most probably rejected because Al-Abbas Cement was not interested in the price that Attock was offering. “The additional cost to debottleneck the Al-Abbas Cement factory was not a problem for Attock Cement,” said Topline Securities’ analyst, Furqan Punjani. He says that the decision for termination of the negotiations was probably due to Al Abbas Cement. He explained that Attock knew that it would have to restructure the whole cement plant.

Attock management disclosed that Al-Abbas Cement’s effective capacity was less than the official stated capacity of 0.9 million tons and that the full advantage of the name plate capacity would only have been achieved after the cement plant had been ‘debottlenecked’ by Attock Cement.

An analyst observed that this was not the first time the sale of Al-Abbas had not gone through. He said that the company had recently done Balancing, Modernisation and Refurbishment (BMR), which it has been trying to factor into the price that it is asking for. The BMR is useless to Attock and it will not be willing to pay for it, which is probably why the sale did not go through.

Attock Cement is expecting cement prices to rise and looking to increase its cement production capacity. The industry believes that the rising trend in cement prices is due to higher energy and coal cost which the industry has just started passing on to the customers.

Attock Cement expects the fiscal year of 2011 to bode well for the industry as local and export demand will keep dispatches on the higher side.

Attock Cement is famous for its brand name Falcon cement in the local market. Besides local sales, the company also exports cements to countries like Sri Lanka, Middle East and African states. It is the second largest cement exporter in the southern region, according to Topline Securities. It has a plant capacity of 1.8 million tons.

Meanwhile, Thatta Cement is currently buying a cement factory and capacity-wise it will cost the company around $65 per ton.

Published in The Express Tribune, July 29^th, 2010.