Fauji Cement to become Pakistan’s third-largest cement player

The Fauji Cement Company Ltd (FCCL) is currently undertaking two expansions to become the second-largest cement producer in the north of Pakistan and third-largest cement player in the country as a whole. Top officials from the company disclosed this during a corporate briefing on 18 October discussing the FY21-22 financial result (the FY21-22 profit of the company was the highest in history) and future outlook. 

According to Topline Pakistan Research, the merger of Askari Cement and Fauji Cement was completed in FY21-22 and the 1QFY22-23 accounts will represent the full impact of both companies.

The company’s capacity increased from 3.6Mta to 6.4Mta post-merger with Askari cement as plant locations rose from one to three, and market share grew from 8.07 per cent to 13.98 per cent in the north of Pakistan. FCCL’s cement dispatches during FY21-22 were recorded at 5.6Mt post-merger (domestic 5,300,201t and exports 306,673t), compared to last year’s 3.5Mt.

Expansion
FCCL is expanding the Nizampur site in Khyber Pakhtunkhwa and also at the DG Khan site in the southwestern part of Punjab. The 2.05Mta Nizampur expansion is expected to come online in the 4Q22. The total project cost is PKR27bn (US$122.3m), with PKR17bn being financed through debt (58 per cent long-term financing facility – LTFF, and temporary economic refinance facility – TERF), and 42 per cent from short-term financial assistance – STFA) and PKR10bn through equity.

The expansion of 2.05Mta in DG Khan is due to come online in the 3Q24. The project is expected to cost PKR32.4bn, with PKR20.4bn financed through debt (44 per cent LTFF NS TERF and 56 per cent STFA) and PKR12bn through internal cash generation. The project has already incurred capex of PKR3.5bn. Due to the Pakistani rupee devaluation against the US dollar, management sees a hike of around PKR2.2bn in project cost, which will be financed through internal cash.

In addition, FCCL is also setting up an 8MW waste heat recovery (WHR) facility at Nizampur as well as adding 11MW at the existing site.

Cement demand in FY22-23
In FY22-23, management expects to see local cement demand drop by 10-15 per cent due to higher high cost of production and low consumer buying power. The expected decline in dispatches could be contained if the government allocates more budget to infrastructure considering the election year.

According to the management of FCCL, the current manufacturing retail price of cement in the north is around PKR960/bag (US$4.36/bag).

AHCML Research, commenting on the above, added that Afghanistan is the only export market of FCCL. The Afghani market is showing some signs of recovery in FY23 compared to the previous year. The export price to Afghanistan stands at US$45/t.