Lucky Cement Limited on Friday announced its intention to expand its current capacity in the South by installing a 1.25 million tonnes per annum cement production plant at its existing production facility in Karachi, said a company notice released by the Pakistan Stock Exchange.
The total cost of the project is expected to be around $30 million. This Brownfield expansion in the south along with a planned Greenfield expansion of 2.30 million tonnes in the north, which has already announced, will take the company’s production capacity to 11.30 million tonnes, restoring its position as the largest cement manufacturer in the country. Lucky Cement was recently stripped of this status after the acquisition of Lafarge Pakistan Cement (LPCL) by Bestway Cement Limited (BWCL).
Analysts expect that the company’s South expansion is motivated by rising demand in the South region due to fast-track developments at the Gwadar port and to maintain its market share in the region after entry of DG Khan Cement’s (DGKC) 2.6 million tonne cement line in the region.
An analyst said that the calculations suggest that Lucky Cement’s market share will jump to 20 per cent from 17 per cent (based on installed capacity in the country).
“We are optimistic about demand outlook in the country and expect this project to be value accretive. For the time being, however, we wait for further clarity on the project and will update our investment stance accordingly.
As the company has a strong balance sheet position of Rs 23 billion cash in March, the expansion will likely be financed completely through internal equity.
Lucky Cement’s 2.3 million tonnes per annuam Greenfield plant is expected to debut by the 2nd quarter of 2018.
The latest expansion will likely create further pricing pressures in South as regional expansions totaling 5.15 million tonnes per annum will result in significant buildup of surplus capacity in the South region.