KARACHI: Fauji Cement Company Ltd’s ‘Raw Meal Silo’ — a structure with a height of a four storey building that stored 25,000 tonnes of raw material — came crashing down on the coal mill area causing damage and suspension in company’s operations of production line-2.

The accident which occurred on Sunday did not cause any loss of life but has rendered FCCL’s line-2, which supplied 7,200 tonnes per day of production, non-operational for approximately 5-6 months.

“It is too early to give an accurate assessment. However, the process of evaluation and cleaning the area is in progress and the members will be updated about the precise timeline of start up as soon as possible”, the company informed members through the PSX on Monday. FCCL management added: “Line 1 of 3,700 TPD is already under planned maintenance due to sufficient clinker stocks and is expected to be operational soon which will help the company to continue its dispatches in the market, however at a lower rate”.

For FCCL shareholders, the news was a bolt from the blue. The price of the stock quickly dropped to hit its ‘lower circuit’ with loss of Rs2.12 and close at Rs40.31 on Monday.

Analysts at Topline Securities stated the company was in the process of starting up its production line-1 (old line) having 3,700 tonnes per day (1.1 million tonnes per annum) of clinker capacity. With only a month remaining, the supply for FY16 was unlikely to be impacted, though the company’s FY17 cement production was feared to decline by around 42 per cent (1.36m tonnes) from (Topline’s) FY17 production estimates of 3.24m tonnes. Analysts suggested that the company will be required to incur capital expenditure of Rs1 billion to 2bn, which could later be claimed from insurers.

Analyst Tahir Abbas who follows the cement sector for brokerage Arif Habib Limited said that his channel checks suggested the possible cause of incident to be combustion of gases into silo amid inadequate ventilation system. However, clarity was yet to emerge.

“The big question remains if the mill will be repaired or replaced with a new one?” Tahir mused.

FCCL was only operating line-2 at full capacity due to its higher efficiency while line-1 remained closed. Clinker line-2 was a German made line and was installed by Polysius, a reputed German cement manufacturing firm in 2011. “Repair and maintenance of the coal mill can be completed as early as 4-5 month while replacement could take 9-10 months,” the analyst estimated. As for the cement silo, its construction was thought be completed in 4-5 months with an estimated cost of Rs200-300m.

Published in Dawn, May 31st, 2016

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