Attock Cement Pakistan Limited (ACPL) was incorporated in 1981 in Hub Tehsil of Balochistan province. The company initiated production in 1988 with an initial production capacity of 2,000 tons per day, which was enhanced further by 400 tons in 1994.
In 2002, the company acquired ISO certification 9001:2008, and was listed on the Karachi Stock Exchange in the same year. In the following year, Attock installed an in-house coal firing plant which was followed by a plant expansion (installation of second production line) in 2006.
In recent years, Attock Cement has advocated greater efficiency in cement production, with installation of Waste Heat Recovery Project for generation of 12MW power in 2010. The company is also registered with United Nations Framework Convention on Climate Change (UNFCCC) for carbon reduction in production processes and installed an alternate fuel system in 2013.
ACPL specialises in the manufacturing of its Falcon brand cement. ACPL products include ordinary Portland cement, sulphate resistant cement, and Portland blast furnace slag cement. The Pakistani cement industry is divided into North and South zones.
Attock Cement is located in the South zone with manufacturing facilities in Hub Tehsil, Balochistan. Its operational capacity currently stands at 1.7 million tons per year, each for clinker and cement. Compared to the industry, Attock's installed capacity makes it a mid-sized operation in the country.
ATTOCK GROUP ACPL is part of Attock Group of Companies, Pakistan's only vertically integrated oil conglomerate. Its associated companies include Attock Petroleum, Pakistan Oilfields, Attock Refinery and National Refinery. Attock Group also has interests in power generation and IT through Attock Generation Limited and Attock Information Technology Services.
The Attock Group is owned by Pharaon Investment Group Limited, Holding S.A.L Beirut Lebanon. Other than oil exploration, production, refining & manufacturing of petroleum through Attock, Pharaon Holdings is also engaged in diversified entrepreneurial activities internationally that include Hotels, Chemicals and Real Estate. Attock Cement is 84.06 percent owned by Pharaon group.
INDUSTRY REVIEW FY13 FY13 was a year marked by turbulence for the Pakistani economy. GDP grew by 3 percent amid law and order and energy shortage crises. However, the performance of cement and construction sectors was satisfactory compared to the previous years.
At present, total cement industry capacity in the country stands at 44.8 million tons. During the year FY13, local demand grew by five percent, clocking in at 25 million tons. Another 8 million tons of cement production was met with foreign demand, meaning exports formed a third of local demand.
Over the years, the cement industry has become increasingly reliant on exports to maintain decent utilisation rates. In the absence of investment in housing and construction by both public and private sectors, the trend in reliance on exports is expected to continue.
According to industry experts, only high spending on infrastructure by the government can revive the dampened local demand for cements. Though at the same time, the industry has been able to make its marks in markets such as Afghanistan, Middle East, Africa and Sri Lanka. In the absence of any governmental subsidy, these exports are an encouraging sign but remain susceptible to external shocks.
In order to continue the recovery momentum, the cement industry would do well by controlling its high energy costs and investing in capital intensive, fuel efficient projects
PERFORMANCE BRIEF FY13 In FY13, Attock Cement managed to sustain growth and increase its overall utilisation and profitability. Its capacity utilisation for clinker and cement stood at 104 and 103 percent, respectively. Total cement dispatches were flat at 1.8 million tons during the year; however, its local market sales grew from 1.34 million tons in FY12 to 1.36 million tons this year, a year-on-year growth of two percent.
Production in excess of local demand was exported to aforementioned regional markets, clocking in nearly 484 thousand tons. This was despite lower cement prices in the international market. However, as per the company director's report, "it has managed the sales mix in such a manner (so as to) achieve maximum sales revenue while maintaining capacity utilisation of hundred percent.
ACPL's top line grew by 9.6 percent year on year, while cost of sales grew by only 3.7 percent in comparison. This equalled a gross profit growth of nearly 26 percent, especially given the high base effect from last year. In spite of rising electricity costs, the cost side was kept under control due to contribution from Waste Heat Recovery (WHRC) project, which served nearly 25 percent of company's electricity requirements during the year. Decline in coal prices from USD 106 per ton to 99 per ton also contributed towards lowering production cost. However, this was partly offset by devaluation of Pak rupee against the dollar.
According to the company report, "a combination higher net retention and effective control of production cost" resulted in the record Profit after tax for the company. The company managed to improve its gross profit margin by 390 basis points compared to the previous year.
PROFITABILITY Other income grew by 55 percent during the year mainly on account of gain on disposal of investment in mutual funds, sale of operating assets and gain on sale of furnace oil. Finance charges were kept under check and were not able to make a dent in Profit before tax, which grew by 32 percent. The company posted record Profit after tax of Rs 2,136 million during this year, growing by nearly 49 percent year on year. Operating margins also improved from 19 percent during FY12 to 23 percent in year ending June '13.
FUTURE OUTLOOK According to industry experts, the lull in local cement demand can only be revived by high government infrastructure spending. Luckily, the incoming government announced PSDP spending of Rs 1.155 billion in federal budget of FY14, along with plans to construct 100 housing colonies over a period of next three years. However, given the limited fiscal space available to the new government due to high fiscal deficit, it remains to be seen whether these projects will see the light of the day.
On export front, cheaper cement prices in regional countries are making several export markets unattractive for the company; influx of Iranian cement in Iraq is a major case in point. Attock cement, as well as the industry in general, needs to explore other export destinations, if it is to continue its reliance on export or face another period of decline in utilisation levels.
=========================================================================
ATTOCK CEMENT PAKISTAN LIMITED
=========================================================================
Rs (mn) FY13 FY12 FY11 FY10 FY09
=========================================================================
Financial Performance
Turnover - net 11,508 10,504 8,554 7,668 8,510
Cost of sales (7,973) (7,691) (6,823) (5,710) (5,801)
Gross (loss) / profit 3,535 2,812 1,731 1,958 2,709
Distribution Cost (578) (571) (513) (467) (437)
Administrative expenses (263) (222) (186) (184) (182)
Other expenses (230) (119) (77) (103) (147)
Other income 227 146 104 262 167
Profit from operations 2,691 2,047 1,059 1,466 2,108
Finance cost (15) (12) (24) (78) (120)
Profit before taxation 2,676 2,035 1,034 1,388 1,989
Taxation (540) (598) (350) (372) (496)
Profit/(Loss) after taxation 2,136 1,437 684 1,017 1,493
Other comprehensive income - - - (13.062) 12
Total comprehensive income 2,136 1,437 684 1,004 1,505
Earning per share - basic 21.45 14.43 7.90 11.74 17.24
Source: Company Accounts
=========================================================================
========================================================================
FY13 FY12 FY11 FY10 FY09
========================================================================
Profitability
------------------------------------------------------------------------
Gross profit margin % 30.7% 26.8% 20.2% 25.5% 31.8%
Operating profit margin % 23.4% 19.5% 12.4% 19.1% 24.8%
Net profit margin % 18.6% 13.7% 8.0% 13.3% 17.5%
ROCE % 33.9% 30.9% 18.3% 24.5% 36.1%
Interest coverage times 180.7 176.5 43.6 18.9 17.6
------------------------------------------------------------------------
Return to Shareholders
------------------------------------------------------------------------
ROE % 27% 22% 12% 19% 31%
EPS (basic) (Rs) 21.45 14.43 7.90 11.74 17.24
Price earning ratio times 6.15 4.91 6.20 5.62 4.06
------------------------------------------------------------------------
Solvency & Liquidity
------------------------------------------------------------------------
Debt-to-Equity times - - - - 0.13
Current ratio times 2.77 2.52 1.70 2.62 2.43
Quick ratio times 1.86 1.05 0.34 1.67 1.36
------------------------------------------------------------------------
Activity
------------------------------------------------------------------------
Total asset turnover times 1.17 1.26 1.16 1.09 1.22
Fixed asset turnover times 1.92 1.94 1.60 1.82 2.05
------------------------------------------------------------------------
Source: Company Accounts
========================================================================