Lucky Cement to expand its Pezu Plant by 3.15mln tons

KARACHI: Lucky Cement has announced expansion of its Pezu Plant (North Region) by 3.15 million tons to 10 million tons due to rising cement demand, a notice filed with the Pakistan Stock Exchange said on Monday.

This would take total capacity (north and south) for Lucky Cement to 15 million tons, which would help it cater the rising demand created by accelerated activity in infrastructure and other development projects.

Topline Securities in a report said this project was expected to cost Rs25 billion to Rs26 billion. “The company is likely to get Rs10 billion under concessionary loans (Rs5 billion in TERF and Rs5 billion in LTFF) at a cost of 2-4 percent,” the report added.

The rest of the funds would be financed through internal cash generation. This facility was expected to come online by the second half of financial year 2023. “We believe, this expansion will have earnings impact of Rs9-10/share (7-8 percent of FY23 earnings),” the report said.

The brokerage also said that there was enough space for cement expansions from FY22 onwards in the northern region, as local sales utilisation would be above 85 percent (total utilisation over 95 percent). Industry dynamics remain comfortable when local sales utilisation remains above 70 percent.

“We estimate north can accommodate 10-15 million tons of cement capacity without significantly impacting prices, as local sales utilisation will still remain above 70 percent,” the report added.

Taurus Research in its note said the expansion would likely enable the company cater the growing local demand, as economic activity accelerated along with uptick in both retail and mega infrastructure development projects. Lucky Cement has a domestic cement market shared of 13.7 percent as per FY20 financials.