Maple Leaf Cement Factory Limited was incorporated in 1960 with the capacity to produce 300,000 tonnes of clinker per annum. The company came to be listed on the three Pakistani stock exchanges in 1994.

MLCF raised dry process plant capacity to 4,000tpd, from 3,300tpd in 2005 through de-bottlenecking and up-gradation. The latest condensed consolidated figures at Sept 30, 2016 show total assets of the company at Rs33.8bn.

In a recent development, MLCF told the Pakistan Stock Exchange (PSX) on Jan 18 that the company had given an order to Danish firm FLSmidth for engineering, procurement and equipment of a complete cement production line which would have a daily capacity of 7,300 tonnes. The plant would be located in Iskanderabad, Mianwali.

In a recent development, MLCF told the PSX that the company had given an order for a complete cement production line with a daily capacity of 7,300 tonnes

“The project is expected to begin trial production in February 2019,” the company secretary said in the filing with the PSX.

Brokerage Insight Securities estimated that the new clinker line-3 would cost more than $80m and the total cost of the entire expansion project was estimated at $200m.

Besides the above — termed by analysts as ‘brown-field expansion’ — MLCF is currently undertaking another key development project: A 40MW coal captive power plant, which cement sector watchers expect to come online in 1QFY18. Civil works are in progress.

Analyst Nabeel Khursheed at Topline Securities, in an industry overview last week, wrote that Pakistan’s cement sector profitability grew 17pc in the 2QFY17, on account of higher sales.

“Domestic demand has been phenomenal for concrete players as they enjoy a high margin on local sales thanks to support from private sector spending and infrastructure projects under the China Pak Economic Corridor (CPEC)” he said and highlighted the fact that credit to the construction sector as of Dec 2016, rose 26pc YoY.

An efficient fuel mix and better coal inventory management helped improve gross margins while strong sector fundamentals prompted manufacturers to post hefty cash generation leading to improved liquidity and accelerated deleveraging.

In mid-Feb, the company announced results for second-quarter financial year 2017, posting profit after tax at Rs1.471bn: taking the first half FY17 profitability to Rs2.694bn, up 15pc over 1HFY16 earnings of Rs2.342bn.

Net sales rose by 10pc mainly driven by higher local cement sales. Local dispatches were up due to rising demand from infrastructure spending.

Yet, like the industry in general, the company’s cement exports continue to falter due to lower sales to Afghanistan, Pakistan’s biggest export market. Exports to Afghanistan declined on account of increased competition from Iranian cement.

The directors said in their report for the first quarter that coal prices in international markets had rebounded due to a cut in production in China and limited supply from mines due to logistic factors resulting in an increase in coal prices.

The company, however, derived the benefit of reduced prices throughout the quarter on account of coal inventory utilisation, which was built up at lower cost. The oil price trend was also increasing, resulting in a higher rate of power from the national grid.

During the first quarter, the company continued to operate its furnace oil based engines because of improved viability owing to lower oil prices as compared to grid power price.

The company is also continuously benefitting from lower inland transportation costs through haulage via the railway network resulting in reasonable savings.

Going forward, directors stated in their 1QFY17 report that they expected increased domestic demand for cement on account of a rise in PSDP allocations as the elections approached and investment increased on the CPEC.

Other key projects such as the Bhasha Dam, Dasu Hydropower project, Tarbela Extension Projects and Karachi-Lahore Motorway, together with increased construction activities in the private sector as a result of an upbeat macro-economic picture that included lower inflation levels, also added to the positive forecast.

“The CPEC is expected to prove to be a great opportunity for speeding up the country’s economic development and it should increase demand for cement in the mid-term”, directors hoped.

In a recent report, Syeda Humaira Akhtar, analyst at brokerage JS Global, affirmed that cement players could post another year of strong performance in FY17 led by double-digit demand growth, high and stable margins and growing energy efficiencies.

“We see a marginal impact from the recent increase in coal prices (+51pc FYTD) given improving cost efficiencies and the ability of the players to pass on the impact to the end-consumers amidst increasing utilisation levels and limited supply additions this year”, she said.

Published in Dawn, Business & Finance weekly, March 6th, 2017