Lucky produces cement at lowest cost due to WHR Plant

LAHORE –– The Lucky Cement has been the lowest cost producer due to its Waste Heat Recovery Plant (WHRP) at Karachi, which would further decline on account of another WHRP of 10MW at Pezu to be commenced soon. Presently, the company’s cost per ton is nearly Rs 2,922 per ton as against the cement industry’s other company’s cost of Rs 3,374 per ton, translating into a less cost benefit of Rs 452 per ton. Experts have estimated cost per ton of Rs 3,141 per ton for FY11. Moreover, LUCK’s expansion cost per ton is also lowest vis-a-vis industry i.e. Rs5,100 per ton as against Rs 10,625 per ton of the other companies of the cement sector.

The company is thriving on demand from southern region wherein company executive stated that the recent production line unveiling in northern zone is also creating glut like situation and also affecting price.

According to company sources, demand is slackened in northern zone despite all expectations of pick up in the aftermath of floods. The lack of funds allocated vide Public Sector Development Program (PSDP) is cited as one of the prime reasons behind sluggish demand in northern zone (where there is nearly 82 percent of country’s installed capacity). However, LUCK thrives from increased southern demand and its traditional proximity to sea routes as well as presence of borders like Wakhan in the Balochistan province.

As per presentation, the company CEO sounded bullish on final quarter sales given latent demand from premier market Afghanistan and recent overtures with India regarding resumption of cement supplies. Experts have estimated overall exports to touch 2 million tons in FY11 as against 2.7 million tons in FY10 given infrastructural developments emanating from Afghanistan, East African countries, Sri Lanka to name a few. He was particularly very bullish on developments in Sri Lanka that had emerged as key market.

LUCK’s primary markets used to be exports to GCC countries 3 years ago where 80% of its export turnover used to be consumed but with the advent of financial turmoil the supplies were diverted towards newer destinations such as Iraq, South Africa and now Sri Lanka.

LUCK is also expected to benefit from the export of commodity to India, as it is clearly facing cement shortages. However, experts anticipate overall cement export to decline by 26% on account of dull prices in the export market.

Ms Gulshan D Ferozepurwalla, an expert, said that cement prices would remain firmed up given escalation of input cost viz. coal prices. She sees LUCK has balanced fall in exports by shifting its main focus to the local sales especially in southern zone.

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