cement, Construction

Attock Cement Role in Construction Material

Attock Cement

Background 

Set up in 1981, Attock Cement is a public limited company. It’s first commercial production took off in 1988. Today, Attock Cement boosts a production capacity of 3 million tons per annum. Attock Cement is running three manufacturing facilities. As the name suggests, this cement company is situated in Attock, Balochistan. This company primarily supplies cement to the Southern region. Today Latest Prices of Cement in The Pakistan Market.

Attock Cement is the subsidiary company of S.A.L. Almost 83% of the market shares of Attock cement are owned by shareholders which hold at least 10 percent of the shares. The Pharaon Investment Group Limited is solely included in this category. Individuals hold almost 9% of the shares of Attock Cement while 4% of the shares are held by the general public. Less than 1% shares of the company are held by directors, CEOs of this company, their spouses and minor children.

Market Dynamics 

Since the last seven years, the topline of Attock Cement has been undergoing upward mobility.  2020 was the only year when the record of previous years was broken and the profit margins declined slightly as the industry dynamics began to change after 2017. The situation was quite different when back in 2017, Attock Cement reported 6 percent growth in its sales revenue. Even volumetrically, cement dispatches rose up to 6% consecutively in coming years. These cement dispatches were estimated to be around 2,082,582 metric tons in total, both domestic and export markets.Out of the total 2,082,582 metric tons, almost 1,582,427 metric tons of cement was sold in the domestic market. The surplus cement was exported to countries like Yemen, Sri Lanka and India. During that time, a marginal rise in production costs was witnessed alongside other financial fluctuations however, the profitability remained steady with a net margin of almost 21%.

By the year 2018, the topline growth was 12 percent. In the second half of the year 2018, the commercial production of Line 3 commenced. In the following six months, Line 3 produced 538,884 tons clinker. In the same year, the production of the Waste Heat Recovery System also started, easing up the high power requirements. This led to a 20% rise in total dispatches where 10% of the dispatches were attributed to the cement. 

Attock Cement Export Value in Previous Year

As for the exports, clinker export dispatches were nil in 2018 and remained the same as previous year which accounted for 205,141 metric tons. Cement exports were also affected and declined by 7%. The lower performance in the export market was due to the high performance in the domestic market which remained the main target due to better prices and less rigorous competition as compared to the export market. 

Despite this volumetric rise, the profit margins remained stagnant due to higher production costs. The production cost amounted to almost 71% of the revenue which was 10% more than the previous year i.e. 2017. 

There were many factors that contributed to this increase in production costs. Two of the major factors were increased fuel prices and coal procurement prices. The fuel costs were raised by a staggering 46% while the coal price increased USD 88 per ton to USD 102 per ton. Other than that, the cost of packaging increased up to 15% while the cost of raw materials also increased up to 20%. The reason behind this was the high royalty rates imposed by the Government.  Due to the lack of any gain on sale of open-ended mutual fund units, the operating margin was also reduced to 20%. 

Key Challenges Faces from 2019-2021

The year 2019 came with a ray of new hope for Attock Cement. 2019 was quite promising for Attock Cement because the revenue grew up to 26% which was the highest record of the decade. There was an increase of 7% of the cement dispatches out of 28 percent increase in the total dispatches. A positive impact on the realization of exports proceeds was also observed.

One of the reasons behind this positive impact was that the net retention per ton of the cement was increased by RS 198 per ton. This increase in net retention was perpetuated by enhanced sale mixes and rupee depreciation. Despite all these positive changes, the profit margins remained stagnant for another year due to high production costs. 

In 2019, the production costs accounted for 77% of the revenue. Fuel costs increased by another 23% however, coal prices were reduced in the international market. Nevertheless, the reduction in coal price was off-set due to currency devaluation. Costs of packaging also rose up to 39%. 

Attock Cement sales revenue Record

In 2019, the company also witnessed the lowest record of net margins in its history. The net margins fell almost to 10 percent. 

In 2020, the sales revenue declined. This happened for the first time in seven years as they fell by almost 11%. 9% decline was witnessed in total dispatches and 33% decline in local dispatches of cement. The primary reason for this decline was the cut-throat competition with the overhaul of new entrants in the Southern market. The cement companies from the Northern region began to emerge in the South. 

The situation was further aggravated when the wave of Covid-19 hit the country. The imposed lockdown came with serious consequences. Exports significantly fell due to the closure of the market. In 2020, the increase in production costs was negligible. Gross margins remained flat but the distribution costs amounted up to 10% of the revenue. The reason behind this was the high total quantities of cement and clinker. Resultantly, the bottom line contracted (nearly halved) and net margin was all time low at 6%.

In the first few months of the year 2021, the topline rose up to 5%. Total cement dispatches declined by 7%. However, there was an overall increase in dispatches owing to the clinker export dispatches. The total increase is estimated to be around 58%. The topline growth was also witnessed. The production cost rose up to 81% of the revenue which is almost 7% more than the previous year. The per ton production costs were lower but the actual surge came from the high power costs incurred due to the tariff revision of K-electric. Profits margins were also lower , same as the previous year. 

The Future of Attock Cement in Market:

With the government’s drives to restore the economy and backing the business sector, notwithstanding CPEC related ventures, the organization predicts an increase in demand for cement consumption, however, there also exist access limits. Along these lines, while volumetric development might be seen, it may not convert into higher productivity. There has been an improvement in price for clinkers as the Chinese market has been opened for Pakistani clinkers. Besides that, given the duty weakness, the organization has started a 20MW solar power project that will minimize its dependence on the national grid. 

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