Beyond borders: Lucky Cement hopes to make a mark with Iraq plant

Unit in Basra expected to start production by the end of 2013.

LAHORE:

It has been a decade since Lucky Cement made forays into export markets by enhancing the capacity of its Pezu plant in Khyber-Pakhtunkhwa and by establishing a unit in Karachi. In the next one year, the company is expected to make a mark overseas as executives believe that its Iraq plant will come on stream by the end of 2013.

“We are looking to operate beyond borders to cater to the needs of Iraq, following a venture in Congo where we have invested $230 million,” said Noman Hasan, Chief Operating Officer of Lucky Cement, in an interview with The Express Tribune.

Lucky Cement, a sister concern of the Yunus Brothers Group which started operations way back in 1962 as a trading house, entered into commercial business in 1996 and today holds the title of Pakistan’s largest cement manufacturer with a production capacity of 24,000 tons per day and 7.75 million tons per year.



Expanding beyond borders, Lucky Cement in 2011 kicked off work on a plant in the Democratic Republic of Congo, a central African country, as a joint venture with some locals. The plant, with a capacity of 1.5 million tons and 50% owned by Lucky, will take another three years before coming on line.

Last year, the company invested in a cement grinding plant as a joint venture partner in Basra (Iraq) and this will start production before the close of the current year.

“This is just a beginning for us in the drive to become a multinational brand, we may invest in some other countries as well, but things are yet to be finalised,” Hasan said.

Pakistan is known as one of the best cement manufacturers in the region and its products are readily accepted in neighbouring countries. However, exports stand well below the potential.

In an attempt to overcome a major hurdle – transportation cost – in the way of exports, Lucky had established the Karachi plant. It exports to the Middle East and other countries via sea and has streamlined its transportation system, built storage and deployed energy-efficient machinery.

In 2007, the company exported loose cement mainly to Middle Eastern countries because of massive development work there.

Though the company claims that it is the largest cement exporter of Pakistan, it is also increasingly focusing on the domestic market, encouraged by strong demand.

Domestic sales of the company grew 5.5% to 1.77 million tons in the first half of the current fiscal year 2012-13. However, exports dropped 14.6% to 1.01 million tons.

With a handsome share price, Rs157.59 at Thursday’s close, at the Karachi stock market, the company hopes the price will go further up as indicators are quite positive.

“We are focusing on local markets as I don’t see any demand issue in coming years,” Hasan said. “To make our plants more energy-efficient, we are replacing our Chinese machinery with European equipment, which saves energy and is easy to operate.”

However, he cautioned that increasing the market share would not be easy, especially when plants are operating at half their production capacity. Against daily production capacity of 24,000 tons, Lucky plants are only producing around 18,000 tons.

The company, which claims to have around 17% to 20% share in the local market, believes that it will be wise to keep this share intact, instead of going for more, in the face of competition.

With efficient and accurate buying of raw material, energy-efficient plants and a strong logistics setup, the company needs a good management and that’s what it is doing to reduce the operating cost. It has so far managed to save up to 15% and is looking to increase it.

“We cannot change the top line, but can make the process cheaper for increasing our revenues,” Hasan said. “Market growth is between 1% and 2% annually, but I think in the next three to four years, we will start operating at full capacity and this definitely will boost our revenues and market share.”

Published in The Express Tribune, February 8^th, 2013.

Like Business on Facebook to stay informed and join in the conversation.