Pioneer Cement Company Ltd (PIOC) in a stock filing informed that it has signed a Memorandum of Understanding with sponsors of Galadari Cement (GULF) Ltd (GCGL) to acquire 100 per cent stake of the company.
GCGL was incorporated in 1980 with acquisition of land at District Hub, in Baluchistan province of Pakistan, while formal construction of plant had begun during 1998. The plant's main equipment was procured from European manufacturers. However, due to legal and inheritance issues the plant experienced multiple set backs. The civil work and construction is currently more than 50 per cent complete.
A local research house assumed that the primary reason for the acquisition of GCGL is to hold a strategic place in the new domestic market of the southern region to cater to upbeat cement demand (local and exports) and enjoy premium pricing.
It is understood that PIOC may not immediately complete the construction at its site, but it intends to finalse legal, financial, tax and technical (engineering) matters in order to complete its transaction within the next 6-9 months.
Once construction commences, the company is expected to incur PKR6-7bn (US$56.9-66.4m) in capital expenditure for the 1.05Mta plant with an average gestation of two years (commissioning of date in FY21).
Once GCGL’s plant comes online and after incorporating the already announced expansions by other players, the southern region’s capacity could grow by 100% to 17.1Mta within a span of 4 years (FY18-21).
