Fauji Cement's expansion will make it Pakistan's third-largest cement producer

Fauji Cement’s Expansion will make it Pakistan’s Third-Largest Cement Producer

Fauji Cement’s expansion will make it Pakistan’s third-largest cement producer

Fauji Cement Company Limited (FCCL) is undertaking two major expansions that will enable the manufacturer to become the second-largest cement producer in the northern region and the third-largest in Pakistan.

Senior company officials announced the developments at a company meeting held on October 18 to discuss financial results and future prospects for fiscal year 22.

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According to Topline Securities, who attended the meeting, the merger of Askari Cement and Fauji Cement in FY22 has been successfully completed. The financial statements for Q1 2023 will show the full impact of the two companies shared by the management.

FCCL is expanding the Nizampur site in Khyber Pakhtunkhwa and the DG Khan site in Punjab.

“Following this expansion, FCCL will become the second largest player in the north and the third largest cement player in the country,” the brokerage said.

The Nizampur 2.05 million tonne extension is expected to be operational in Q4 2022. The overall project is estimated to cost Rs 27 billion, with Rs 17 billion funded by debt; 58% Long Term Financing Facility (LTFF) and Temporary Economic Refinancing Facility (TERF) and 42% Short Term Financial Assistance (STFA), and Rs 10 billion through equity.

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Topline Securities said that DG Khan’s 2.05 million expansion is also expected to come online in the third quarter of 2024.

The project cost is Rs 32.4 billion, of which Rs 20.4 billion will be financed by debt (44% LTFF and TERF and 56% STFA) and Rs 12 billion by internal cash generation.

“Due to the devaluation of the rupee against the US dollar, management sees an increase in project costs of around Rs 2.2 billion, funded by internal cash,” Topline Securities said.

Also, FCCL is building 8 MW Waste Heat Recovery (WHR) in Nizampur, along with 11 MW at the existing site, it has been announced.

For FY23, management expects domestic demand for cement to decline 10-15% in FY23 due to high production costs and low consumer purchasing power. However, management believes that if the government allocates more budget for infrastructure in anticipation of the election year, the expected supply decline can be overcome.

Fauji Cement’s expansion will make it Pakistan’s third-largest cement producer