Fauji Cement's second line to reopen in October

The second production line of Fauji Cement Company Ltd (FCCL) in Pakistan is expected to restart from October this year, easing pressure on company revenues weighed down by the cost of clinker procurement, a brokerage reported on Tuesday.

Production from Fauji Cement’s major unit, located in Punjab, was suspended in May 2016 after a silo collapse, rendering the 7200tpd (2.2Mta) clinker production line non-operational.The collapse of silo, containing 25,000t of raw materials, necessitated the purchase of clinker and as such negatively impacted production costs. It also affected the company’s Line 1 that has an estimated capacity of 945,000tpa.

"Fauji Cement’s line-II… is expected to re-commence operation from October 2017 as opposed to market expectation of some delay," Topline Research said in a report. "Most of the civil works have been completed and the company is all set to begin trial run after Eid next month." Last year, the cement maker said in a stock exchange filing that rehabilitation of production line No 2 was to complete by August.

To help retain its market share, Fauji Cement purchased PKR7.3bn (US$69.2m) worth of clinker during the nine-month period of the last fiscal year. However, FCCL recognised an insurance claim amounting to PKR979m in June 2016. The company received PKR700m on account of insurance claims during 9MFY2017.

"With rehabilitation work on line-II to be completed…, the company will be able to bring its gross margins back to its normal levels," it added. "We estimate FY18 gross margins to average 32 per cent as opposed to FY17 estimated margins of 22 per cent.

The brokerage said waste heat recovery (WHR) of 12MW on Line 2, which also remained non-operational, will start operation with the re-commencement of silo. "The company is in the process of setting up 7.6MW WHR system on line No 1, expected to be operational from January 2018," it added.