Attock Cement announces Rs15 billion expansion in Balochistan
KARACHI: Attock Cement Limited (ACL) has announced a Brownfield expansion at its existing line in Hub, Balochistan with an estimated cost of Rs15 billion.
The company expects the 1.3 million tonnes/annum plant to come online by the first quarter of FY23, the company management announced on Thursday.
ACL has obtained all the requisite regulatory approvals for setting up the cement plant and the letter of credit (LC) for the import of plant and machinery has been established.
According to the company management, the total concessionary finance cost is Rs9 billion, which will be paid over a tenure of 10 years, with a grace period of two years.
Additionally, the board has approved the installation of a 20MW captive solar power plant at its existing site. The solar plant is expected to come online by the end of the second quarter of FY22. The estimated cost for the project is $10.5 million. The company has benefitted from the Renewable Energy Finance Facility for this project.
Currently, the industry has an installed capacity of approximately 73.12 million tonnes of cement/annum, which will expand by 11.8 million tonnes by 2023, and by another six million tons in the subsequent years.
Attock Cement expects the gross margin to shrink in FY22 due to the rising international coal prices and a rise in freight costs.
“However, to combat this issue, the company is focused on creating an effective fuel mix that includes biomass and bio-coal, which are easily available in the local market,”Javeria Shakeel at KASB Securities said.
“Other threats to the company’s profitability are the increasing cost of packaging and the royalty charges. The increase in paper prices is due to a shortage of paper in the international market, due to environmental regulations. As packaging paper is imported from Europe, the rupee devaluation further fuels this issue.”
The management is of the view that there were already bigger players in the north market and setting up a new plant in the north is a capital-intensive move, which the company cannot afford, at present.
Attock Cement forecast 18 million tonnes to come online in the next few years. “If [the] off-take grows 5 per cent/annum for the next six years, [the] local sales will arrive at 74 million by FY27 but if growth/annum is 10/20 per cent, the off-take will settle at 96/153 million tonnes and will exceed the capacity of 87 million tonnes in six years. Hence, the current expansion cycle remains justifiable,” Misha Zahid at Arif Habib Limited said.
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