Maple Leaf Cement Factory Limited (PSX: MLCF) in its corporate briefing said it has decided to diversify its portfolio with entry into the healthcare sector with an estimated Rs. 30 billion investment.
According to a report by JS Global, the project will have a balanced Debt/Equity ratio of 50:50. MLCF is set to contribute Rs. 10 billion of the Rs. 15 billion project equity, securing a controlling interest of ~67 percent.
MLCF has been among the first cement companies to expand its capacity in the ongoing cycle with a brownfield expansion of 2.1 million tons at the existing site in Iskanderabad, taking total capacity to ~7.9 million tons.
The earlier move is expected to help them avail a higher market share, considering that the initiation of expansions by certain competitors is projected to be two years away, with some players delaying their expansion plans owing to a lack of clarity on the economic front.
Close to 30 percent of the CAPEX has been financed by preferential rate loans under the Temporary Economic Refinance Facility (TERF) and Long-Term Financing Facility (LTFF).
Management shared that capacity utilization of the industry should hover around 57 percent during the ongoing year despite the addition of 3 million+ tons capacity in both the North and South regions (2 million tons FCCL plant in North) in the coming quarter.
For FY24, the company sees growth in volumes to be in line with GDP growth. In terms of industry positioning, management stated that MLCF is a market leader in the white cement category. White cement contributes 10 percent to the top line of the company whereas the bottom-line contribution stands at around 20 percent.
The company has remained tilted toward relatively economical local coal due to the advantage of proximity (~2 hours from Darra Adam Khel). The management shared that local coal constitutes 70 percent of the mix as of now and costs around Rs. 40,000/ton. Afghan coal (~Rs. 52,000/ton) is around 15 percent of the mix whereas the remaining 15 percent comes from Biomass and Husk used as fuel. MLCF management shared that it has 7-8 months of Pet Coke inventory locked in at the rate of US$ 110/ton.
MLCF’s power mix comprises 55 percent Coal captive plant, and 31 percent WHR whereas National Grid contributes 10 percent to the mix. Solar plant contributes 4 percent to the power mix of the company. MLCF is not using Wartsilla gas generators for electricity generation due to high LNG rates and a shortage of gas in the country.
MLCF to Diversify With Entry in Healthcare Business
MLCF management has decided to diversify its portfolio with entry into the healthcare sector and has acquired 50 kanals of land in Islamabad for the construction of a hospital. The hospital project will have 250 beds and is slated for completion within three years. The total investment is estimated to be around Rs. 30 billion, with a balanced Debt: Equity ratio of 50:50.
MLCF is set to contribute Rs. 10 billion of the total Rs. 15 billion project equity, securing a controlling interest of ~67 percent. By entering the healthcare sector, MLCF has the opportunity to diversify its current portfolio through the creation of a new revenue stream.
The company has been able to consistently pull off a stable gross-level performance due to better cost management. The report further expects the company’s market share in the core business to remain stable because of the capacity addition giving MLCF an edge over peers.