Fauji Cement project delays, Pakistan

Fauji Cement project delays, Pakistan
Published: 23 September 2010

The new cement plant of Fauji Cement Company Ltd. (FCCL) which was scheduled to come online during the third or fourth quarter of FY2010, is now expected to start production in the second quarter of FY2011. The expansion of 7200tpd would make the company fifth largest cement producer in Pakistan in terms of capacity.

InvestCap, a Karachi-based brokerage house, said the expansion was due to come online during FY10 and has been delayed till 2QFY11, but not highlighted the reasons for delay of project. 

M/s. Polysius, a German cement plant manufacturing firm is implementing installation of state of the art, the largest single line (7200 tons per day of clinker) ever commissioned in Pakistan. 

Meanwhile, FCCL is scheduled to announce its full year earning performance on 24 Sep-10. 

InvestCap forecast that company would register a bottom-line decline of 82%YoY as the company is expected to post a profit after tax of Rs182 m (EPS Rs0.26). It attributed this decline to fall in company’s retention prices to PKR3,414 t in FY10 compared to last year’s level of PKR4,731 t (down by 28 per cent YoY).

The profitability margins would also be adversely affected during the period as coal prices, despite being lower by 13%YoY on average, mounted since Jul-09 (+36% on Jun-10).

The decline in cement prices in the meantime were not able to cover up costs rising fuel and power costs.

The company is expected to maintain FY10 capacity utilisation at 95%, however overall dispatches are expected to remain flat during the year.

Furthermore, InvestCap expects that the company to post a loss after tax of PKR20m in 4QFY10 as average coal prices rose by five per cent on a QoQ basis while retention prices would improve only nominally by three per cent QoQ during the same period.

It may be mentioned here that a longtime leader in the cement manufacturing industry, Fauji Cement Company, operates a cement plant at Jhang Bahtar, Tehsil Fateh Jang, District Attock in the province of Punjab.  It has a cement capacity of 1.165Mta.