Chinese firm to start due diligence for Dewan Cement’s acquisition

KARACHI: Dewan Cement Limited on Friday said it planned to allow a Chinese company to start the due diligence in a possible acquisition of its stake. 

“We received an email from a potential Chinese strategic investor to permit due diligence of Dewan Cement Limited, which might eventually lead to the acquisition of shares,” Hanif German, the company’s secretary said in a statement issued to the Pakistan Stock Exchange. “We intend to permit due diligence.”

The company didn’t mention the name of the potential buyer.  “If any material development takes place we will communicate the same to the exchange (PSX) and the SECP (Securities and Exchange Commission of Pakistan),” German said.

Dewan Cement has a market capitalisation of Rs13.08 billion with 484.11 million shares. The company has been witnessing active trade for a few weeks with 52 percent increase in volume during the last one month. The stock remained part of the top-10 volume leaders on Friday with 20.42 million shares and an increase of 4.7 percent or Rs1.28 to Rs27.02/share.

Dewan Cement Ltd has a capacity of more than 2,880,000 tons/year from two separate manufacturing units: Pakland Cement Ltd and Saadi Cement Ltd.

Cement manufactures, in recent years, increased their capacity to retain the market share on reports of Chinese players’ entry, which could lead to the price competition.

“One name, which is in the news flows, is Anhui Conch. It was one of the largest Chinese cement manufacturers, which has also disrupted the pricing mechanism in the Indonesian cement market,” said Insight Securities in a sectoral report issued early this month. “The local industry fears that the new Chinese entrant could try to dominate the market through its competitive pricing and even clinch the majority of the China-Pakistan Economic Corridor related demand growth.”

Local cement players announced a 13 million tons capacity expansion to save their market share during the last 40 days. 

“In total, 23 million tons expansion plans have been announced (cumulative $2.5 billion investment), while another five million tons more cannot be ruled out,” said the report.  

Pakland Cement Ltd. was established in 1981 at Deh Dhando in district Malir, 44 kilometres off the National Highway, spreading over an area of 150 acres. 

Within one year, an integrated plant with an initial capacity of 300,000 tons per annum was up and running and it was fully operational by 1985, producing superior Ordinary Portland Cement.

In 1987, Sulphate Resisting Pakland, a pioneer product in the private sector, was introduced in the country. 

Supported by the latest technology and intensive machinery, the clinker production capacity rose to 750,000 tons per annum. Subsequently, Pakland blast furnace slag cement was included in the company’s product range.