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Attock Cement to go public

June 05, 2002

KARACHI, June 4: Attock Cement Limited plans to raise Rs100 million through an Initial Public Offering (IPO) on June 18. It will be the second company to go public this year, after the earlier entry of the oil refinery— Bosicor Pakistan Limited— into the country’s equity market.

Attock Cement has already paid-up capital of Rs680.3 million. The company would unveil prospectus on June 10, which would contain the details about the project, plans and prospects. But the information that could be gleaned, indicates that the cement plant is located in southern Balochistan, on the fringes of the Sindh province, hence it falls in the Southern Zone of the local cement industry. The plant with cement production capacity of around 750,000 tons ranks as the second biggest in the Zone.

Mohammed Sohail, research head at InvestCap observes that in the first nine months of the current financial year (July-March 2001- 02), the company had sold 355,075 tons of cement, which was the highest sales by any plant in the Southern zone.

Currently, the Karachi Stock Exchange has 21 listed companies on the cement sector with aggregate paid-up capital of Rs21.6 billion. The sector market capitalization stands lower at Rs14.6 billion, since all but six cement stocks are trading at varying discounts to their par values.

The recently released third quarter financial results by cement companies show an overall improvement over the half term numbers, which a sector analyst at brokerage, Taurus Securities said was primarily because of ‘seasonality’ as cement offtake peaks in the third and fourth quarters. Other factors were stated to be marginal increase in output prices (due to the cement cartel) coupled with increasing benefit of switching from furnace oil to coal—as the low cost firing system of production— producing improved gross margins.

Leaders among the cement producing companies in the country expect to have converted to coal by the end of the year, while Pioneer Cement’s coal firing plant has already begun operations from January 1, this year.

Taurus Securities held the outlook for the cement sector as promising for the fourth quarter (April-June 2002), on the back of pick up in local demand, enabling increase in average plant utilization rate to 70 per cent in April ‘02, from 61 per cent in the first nine months.

On the local front, cement industry relies on revival of construction activity. Saad Hashemy, research head at IP Securities identifies commencement of building of dam projects such as ‘Gomalzam’ and ‘Meerani’ and construction of the Gawadar port along with Karachi-Gawadar Coastal Highway, which could give a boost to cement demand.

Prospects of large scale exports of cement to Afghanistan, has proved all but “irrational exuberance”, as that devastated country still awaits the promised millions of dollars for reconstruction. “In the long run it seems naive to celebrate the rebuilding of Afghanistan”, says Khalid Iqbal Siddiqui, analyst at InvestCap, adding, “But then again, isn’t it human nature to exaggerate life’s little favours when hardship is all that has been seen?”