Maple Leaf Cement to Raise Rs. 4.3 Billion Through Rights Issue

Maple Leaf Cement Factory, the fourth largest cement-maker in Pakistan, plans to raise Rs. 4.28 billion from the Pakistan Stock Exchange (PSX). The company plans to issue 12.5% (65.9 million) rights shares to partly finance an additional 7,300 tons per day grey clinker production, said the company in a recent stock exchange filing in Karachi.

Such steps are expected from local cement makers as Pakistan’s demand for cement has seen massive growth over the years. International demand has also been increasing over the past few years.

The notification from MLCF read that the Board of Directors had given approval to issuing 65,966,740 right shares to existing shareholders at a price of Rs. 65 per share (Rs. 55 per share premium) in order to increase grey cement production capacity by up to 18,000 tons per day. The BOD recommends 12.5 right shares for every 100 ordinary shares at 65 rupees/share.

Maple Leaf Cement has the highest average retention rate in the industry with an 8.4% share in the grey cement market and more than 90% share in white cement market. According to a report from BMA Capital, it has the third lowest cost structure as well.

The company boasts an efficient sales mix along with the ability to operate beyond 100% when the local market demands. Its subsidiary is about to establish a 40MW power plant which should reduce the company’s power expenditure and will provide tax benefits.

The cost of the project will be at least 23 billion rupees, of which 47.8% will be financed by debt, 18.7% via right shares and 33.5% by internal cash generation.

This production line is expected to come online by 4th financial quarter of 2019. Maple Leaf expects its net sales and earnings to have a four-year (FY18-21) compound annual growth rate of 13% and 16%, respectively.