Fauji Cement in possible Askari Cement takeover, Pakistan

Fauji Cement Company Ltd (FCCL) plans to acquire Askari Cement of the Army Welfare Trust (AWT). Both companies are reportedly at an advanced stage of negotiations and are expected to announce a merger soon, once the necessary approval is received from the relevant government departments and board of directors.

Should the deal proceed, Fauji Cement will become the second  largest cement producer in Pakistan as capacity will increase from 3.43Mt to 6.10Mt.

As per FY11 figures, FCCL holds only a 3.6 per cent share in total industry dispatches. After combining with Askari Cement (which has a 3.7 per cent share in industry dispatches) Fauji Cement’s share is expected to be doubled to 7.3 per cent of dispatches.

In terms of capacity, thanks to a new unit added last year, Fauji cement capacity now accounts for 7.7 per cent of total Pakistan volumes and Askari Cement represents 6.3 per cent. The combination of the two companies would account for 14 per cent of Pakistan capacity. InvestCapital Markets also notes that the tie-up would combine both companies cost efficiencies.
 
Askari Cement plants are located in northern part of the country catering to demand in the upper region and exporting cement to Afghanistan. It also exports to Tajikistan and other Central Asian States. It has one plant situated in Wah with a capacity of 1.1Mta and another in Nizampur (1.6Mta), taking combined capacity to 2.6Mta. However, Askari’s capacity utilisation stands at only 45 per cent. Both the plants have been managed by AWT.