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South Pakistan cement battle

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World Cement,

Pakistan’s cement sector is currently awash with expansion announcements, mergers and acquisitions. In the last few months, three manufacturers have announced expansion plans.

Attock Cement (ACPL) recently revealed that it will expand capacity by 1.1 million t at a cost of US$120 million. Before this announcement, Cherat Cement (CHCC) stated that it will spend US$120 million on an expansion of 1.3 million t of cement. Dera Ghasi Khan Cement (DGKC) has also revived plans to add 2.5 million t at a cost of US$300 million.

Capacity utilisation in the South region of Pakistan stood at 87% in FY15; significantly greater than 75% utilisation in the North region. Even if DGKC’s expansion is completed on schedule (by 2018), the region’s cement manufacturers will have to raise capacity utilisation further in FY16 and FY17, to keep up with demand.

The dynamics of competition in the South region are also in for an overhaul. At present, Lucky Cement (LUCK) holds about 42% of that market. ACPL and Dewan Hattar Cement (DCL), both hold about 21% market share, each. After the expansion is complete, ACPL’s share will rise to 30% of the South market. Shares of LUCK and DCL will fall to 37% and 18%, respectively. Growing demand accompanied by stoic capacity may enable some sellers to extract higher prices in the short-run. However, within a couple of years, the competition will heighten.

Now the battle for the South has begun. LUCK’s dominance of the region has been challenged by ACPL’s ambitions.

Edited from source by Joseph Green. Source: Business Recorder

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