Fauji Cement strives to improve fundamentals and strengthen its investment case

BMA Capital Management Ltd believes Fauji Cement Co Ltd (FCCL) will reap the benefits of an uptick in local cement demand by FY25, as well as strengthening market share and efficiency gains through new lines and the incorporation of green technology. In addition the company could benefit from an efficient fuel and power mix to enhance margins, strong pricing power to support profitability in a low-demand environment, and an anticipated reduction in interest rates to reduce debt servicing burden.

Local demand to pick up from FY25
Analysts expect local cement demand to grow at five per cent in FY25 and FY26, owing to improved economic conditions and higher agriculture income. From then on, seven per cent growth in local sales is assumed amidst the expectation of economic and political stability in the country.

Timely expansion to strengthen market share
Fauji Cement has become the third largest cement player in the country. Its amalgamation with Askari Cement and additional capacities of 4.1Mta have enhanced the company’s cumulative capacity to 10.5Mta. The expansion raised FCCL’s capacity-based market share from 10.5 per cent to 13.1 per cent in Pakistan.

Heightened focus on production efficiencies
Fauji Cement strives to become one of the industry's most efficient cement players through green technologies. The company’s solar generation capacity currently stands at 40MW, and its WHR stands at 55MW. These efficiencies yield potential savings for the company for PKR100/bag (US$0.36/bag).