Lucky Cement – one of the largest cement makers in the country – made the most anticipated announcement in the cement sector on Thursday, saying that it will construct a green field plant that would have 2.3 million tons capacity in central Punjab.
The announcement was made via a company notice sent to the Karachi Stock Exchange (KSE).
The project cost is expected to be $200 million and it construction would begin in the first quarter of calendar year 2016, while operations are tipped to begin by the second quarter of 2018.
“The official announcement of a new plant is an important development for the cement sector, but it is not going to pose any threat of a price war between cement companies because this new plant would become operational in three years,” Sherman Securities analyst Saqib Hussain Khan told The Express Tribune.
He further said that with the current, continuous improvement in local cement consumption, companies are positioned comfortably with the present price mechanism in the market. “Better local cement sales have also offset the continuous decline in Pakistan’s cement exports.”
“Investors on KSE-100 Index preferred to trim their positions in the cement sector following Lucky’s announcement of expanding operations in the Punjab region,” said a Topline Securities note.
“The fundamentals of cement industry are so well placed, that the price war concerns in the market would diminish soon,” said analysts.
Speaking to The Express Tribune recently, Lucky Cement CEO Muhammad Ali Tabba said that China Pakistan Economic Corridor’s (CPEC) positive effects are already becoming apparent. “There is improved domestic cement consumption in Pakistan.”
The company is also optimistic about its volumetric growth in the current financial year,” the notice read.
Lucky posts profit of Rs2.97b in 1QFY16
Lucky Cement, along with its expansion plans, announced a net profit Rs2.97 billion in the first quarter (Jul-Sep) of fiscal year 2015-16, up 11.2% compared to Rs2.67 billion in the same period of last year, according to the company notice sent to KSE on Thursday. Earnings per share (EPS) jumped to Rs9.18 from an EPS of Rs8.25 in the period under review.
According to a JS Research report, the result was in-line with the EPS forecast of Rs8.92 for the quarter.
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