NBP and Pioneer Cement sign accord

The National Bank of Pakistan (NBP) signed an agreement with the Pioneer Cement Limited (PCL) on Tuesday to help the latter in expanding its production capacity. NBP Risk Management Group Chief Javed Mahmood, and Pioneer Cement Managing Director Javed Ali Khan inked the accord on behalf of the NBP and the PCL, respectively.
Under the agreement, the NBP has re-profiled the loans of the Pioneer Cement.
The agreement, signed on the basis of an understanding reached last year to facilitate the Pioneer Cement to undertake expansion scheme covering installation of another production unit, will enhance the cement production capacity by 4,300 tons per day.
The NBP, as part of a strategic initiative to revive the industrial units, has extended a supporting hand to the cement company. By allowing a grace period in debt-servicing, it has enabled the borrower to deploy internally generated funds to finance own expansion scheme, raising its capacity to three times the existing one.
The accord also envisages the reduction in mark-up rates on loans by the NBP to 2 percent above KIBOR, and provides for issuance of 11.59 million shares to the NBP at Rs 23 per share in discharge of one of PCL's outstanding liabilities.
Speaking on this occasion, Javed Mahmood said the signing of agreement is part of NBP's initiative to contribute towards economic activity and revive the industrial units. Javed Ali Khan described the agreement a fillip to enhance the production capacity of the Pioneer Cement, saying it would help cater the domestic demand for cement as well as increase the exportable volume of cement.
He said the Pioneer Cement's expanded plant would commence its production in the last quarter of current calendar year and would be able to take advantage of the boom in the demand for cement.
Javed Ali Khan said that total production of company would increase to 6,700 tons per day from existing 2,350 tons, once the expansion process was completed.
About cement export, he declared that PCL would continue to export cement to Afghanistan and Iraq, having topped in export in April 2005 and being second highest in May 2005.
The Pioneer Cement has been able to recoup about 90 percent of its accumulated losses, sustained during the crisis faced by the cement industry for six years. The expansion scheme will enable it to maximise its profit by achieving economy of scale and availing of the current hike not only in the demand for cement but also of price of cement.
Later, in a brief chat with newsmen, Javed Ali Khan, talked about the hike in cement prices. He said that keeping the excise duty intact in budget contributed to the increase of prices, as it was generally expected that there might be reduction in excise duty on cement, which made users to defer purchase of cement.
He also attributed it a demand-push increase as major development projects, being undertaken by the government and construction boom in the country, has caused a wide gap between supply and demand. "Despite the fact that all cement plants are working at full capacity, the total local production falls short of the increasing demand", he said.