The Board of Directors of Attock Cement Pakistan Limited (ACPL) has informed the Karachi Stock Exchange that the company intends to invest around $25 million in a new cement grinding unit in Basra, Iraq. The announcement was made through a letter dated May 27, 2013.
An analyst note issued on the same day by Summit Capital says: “As per our calculation, the company requires total investment of Rs2.46 billion (at a dollar-rupee parity of 98.54)” to implement its plans.
“The company presently has total cash and cash equivalents amounting to Rs1.60 billion in its balance sheet,” the note continues. “We expect, keeping other factors constant, that the management might prefer to partially finance its new project by availing long-term financing, and the remaining portion will be financed from its cash and cash equivalents.”
Summit Capital says the company’s external borrowing and internal financing ratios will come to around 50:50.
“Since Iraq is an economy which is coming out of war with a huge potential for reconstruction activities, we expect the project will pay ACPL back well in the coming years,” Summit Capital analyst Muhammad Sarfaraz Abbasi says in the note. “However, since the project’s plan is at an initial stage, we are waiting for further details from the company to evaluate the impact of the project on its earnings going forward,” he added.
Attock Cement saw profits driven by higher prices of cement during the January to March quarter of 2013, despite subdued demand during the winter season.
Like most of Pakistan’s construction materials companies, Attock Cement operates just one plant: a 1.8-million ton capacity factory based in Hub, the only major industrial town in Balochistan.
The producer of the well-known Falcon brand of cements posted revenue growth of just 9% to reach Rs3.244 billion in the quarter.
