Partnership: DG Khan Cement interested in acquiring Lafarge
If merger takes place, former would become second largest cement producer.
LPCL has added 2.4 million tons per annum to its production with its plant located in Chakwal, Punjab. PHOTO: FILE
KARACHI:
DG Khan Cement Company (DGKC) – country’s third largest cement maker – has expressed its interest to acquire 100% stake of Lafarge S.A in Lafarge Pakistan Cement Limited (LPCL) and appointed a manager for the process, according to a company notice sent to the Karachi Stock Exchange (KSE) on Wednesday.
LPCL has added 2.4 million tons per annum to its production with its plant located in Chakwal, Punjab. At present, Lafarge S.A has a 73% stake in LPCL. Interestingly, Vision Holdings Middle East (currently holding 47% stake in Pioneer Cement) has also shown interest in the same acquisition.
With one plant in Chakwal, DGKC is the third largest cement manufacturer of Pakistan having the capacity of 4.02 million tons and is running at an optimal capacity of 98%. Last year, the company announced to setup a cement- clinker plant of 2.6 million tons at Hub, Balochistan Pakistan.
If DGKC does acquire LPCL, it will become the second largest cement producer of Pakistan (ahead of Bestway Cement). Moreover, it is expected that DGKC may temporarily shelf its plans to set up a plant in the south.
Since DG Khan’s interest in expansion plans had recently sent shock waves in All Pakistan Cement Manufacturers Association (APCMA) – a lobbying group for cement sector – this will increase the comfort level of the market on the sustainability of the pricing arrangement within the sector in the medium term, JS Research said on Wednesday.
DGKC will have to consider financing the acquisition via debt. We believe DGKC has ample room to leverage its balance sheet with interest bearing debt assets ratio currently at 9% with total interest bearing debt at Rs6.11 billion, read the report.
The report predicted the possibility of the company issuing rights shares. “As of March 2014, DGKC’s cash balance stood at Rs451 million, while we expect fiscal year 2014 FY14E-15F average annual cash generation of Rs9-10 billion,” said the report.
Published in The Express Tribune, May 1st, 2014.
DG Khan Cement Company (DGKC) – country’s third largest cement maker – has expressed its interest to acquire 100% stake of Lafarge S.A in Lafarge Pakistan Cement Limited (LPCL) and appointed a manager for the process, according to a company notice sent to the Karachi Stock Exchange (KSE) on Wednesday.
LPCL has added 2.4 million tons per annum to its production with its plant located in Chakwal, Punjab. At present, Lafarge S.A has a 73% stake in LPCL. Interestingly, Vision Holdings Middle East (currently holding 47% stake in Pioneer Cement) has also shown interest in the same acquisition.
With one plant in Chakwal, DGKC is the third largest cement manufacturer of Pakistan having the capacity of 4.02 million tons and is running at an optimal capacity of 98%. Last year, the company announced to setup a cement- clinker plant of 2.6 million tons at Hub, Balochistan Pakistan.
If DGKC does acquire LPCL, it will become the second largest cement producer of Pakistan (ahead of Bestway Cement). Moreover, it is expected that DGKC may temporarily shelf its plans to set up a plant in the south.
Since DG Khan’s interest in expansion plans had recently sent shock waves in All Pakistan Cement Manufacturers Association (APCMA) – a lobbying group for cement sector – this will increase the comfort level of the market on the sustainability of the pricing arrangement within the sector in the medium term, JS Research said on Wednesday.
DGKC will have to consider financing the acquisition via debt. We believe DGKC has ample room to leverage its balance sheet with interest bearing debt assets ratio currently at 9% with total interest bearing debt at Rs6.11 billion, read the report.
The report predicted the possibility of the company issuing rights shares. “As of March 2014, DGKC’s cash balance stood at Rs451 million, while we expect fiscal year 2014 FY14E-15F average annual cash generation of Rs9-10 billion,” said the report.
Published in The Express Tribune, May 1st, 2014.