Lucky Cement Limited, one of the largest cement producers in Pakistan has decided to significantly enhance its production capacity, amid rise in the construction sector.
During the pendency of the meeting of Lucky Cement board of directors on January 29 2021, the directors of the company during the said meeting decided as follows:
“Keeping pace with the increasing demand in the domestic cement industry, on the back of revival of economic activity and uptick in construction projects including both retail level projects as well as mega infrastructure development projects the company has decided to enhance its cement production capacity at its Pezu Plant by 3.15 million tons per annum,” stated the company in a statement on Monday.
The development comes amid a revival in the construction sector, the cement industry posted growth of 11.18 percent in December 2020 as compared to December 2019 as total cement despatches during December 2020 were registered at 4.788 million tons against 4.306 million tons during the same month of last fiscal year. During the first six months of the current fiscal year, the total cement despatches of the country grew by 15.66 percent from 24.751 million tons in July-Dec 2019 to 28.628 million tons in July-Dec 2020.
Meanwhile, Lucky Cement's latest expansion shall be finalized after the conclusion of negotiations with its suppliers and contractors. “The construction work on the project it is expected to commence within current financial year and is expected to have a construction period of 1.5 to 2 years,” informed the company.
This will take total capacity of Lucky Cement to 15 million tons. Topline Securities stated that the expansion project is expected to cost Rs25-26 billion. The company is likely to get Rs 10bn under concessionary loans (Rs 5bn in TERF and Rs 5bn in LTFF) at a cost of 2 to 4%. The rest of the funds will be financed through internal cache generation.
“We believe in Pakistan there is enough space for cement expansion from FY22 onwards (in North region) as local sale utilisation in North region will be above 85% (total utilisation over 95%). Industry dynamics remain comfortable with when local sales utilisation remain above 70%,” it added.