Fauji Cement expansion will make it Pakistan’s 3rd largest cement manufacturer

Fauji Cement Company Limited (FCCL) is undertaking two major expansions, allowing the manufacturer to become the second largest cement maker in the North region and the third largest in Pakistan.

The company’s top officials disclosed the development in a corporate briefing held on October 18 to discuss FY22 financial results and future outlook.

According to Topline Securities, which participated in the session, the merger of Askari Cement and Fauji Cement was successfully completed in FY22, and accounts of 1QFY23 will represent the complete impact of both companies, shared by the company management.

FCCL is expanding the Nizampur site in Khyber Pakhtunkhwa and the DG Khan site located in Punjab.

Bestway and Fauji sailing south

“Post this expansion, FCCL would be the second largest player in North and the third largest cement player in the country,” shared the brokerage house.

The 2.05mn tons of Nizampur expansion is expected to come online in 4Q2022. The total project is expected to cost Rs27 billion where Rs17 billion is financed through debt; 58% Long Term Financing Facility (LTFF) and Temporary Economic Refinance Facility (TERF) and 42% Short-Term Financial Assistance (STFA) and Rs10 billion through equity.

Furthermore, expansion of 2.05mn in DG Khan is expected to come online in 3Q2024, said Topline Securities.

The project cost would be Rs32.4 billion where Rs20.4 billion will be financed through debt (44% LTFF and TERF and 56% STFA) and Rs12 billion through internal cash generation.

“Due to rupee devaluation against US dollar, management sees hike of around Rs 2.2bn in project cost which will be financed through internal cash,” said Topline Securities.

Moreover, FCCL is also setting up 8MW Waste Heat Recovery (WHR) at Nizampur alongside adding 11MW at the existing site, it was disclosed.

In FY23, management sees local cement demand to drop by 10-15% in FY23 due to the high cost of production and low consumer buying power. However, the company's management believes that the expected decline in dispatches could be contained if the government allocates more budget on infrastructure, considering the election year.