DG Khan Cement and Lucky Cement may acquire Dewan Cement Company

Pakistan’s two major cement manufacturers have shown their interest to acquire the controlling shares of Dewan Cement Limited which is presently running in loss. Sources said the consortium of Pakistan banks, which was financing the Dewan Cement, has now approached the Lucky Cement Company and the DG Khan Cement Company with a view to convince them to strike a deal either to acquire the controlling shares of Dewan Cement or at least make a partnership with the said company. Sources said the consortium is doing so to avoid the losses, which may increase in near future. The company registered a net loss of Rs499 million in fiscal 2008 as compared to a net profit of Rs207 million in fiscal 2007, they added. In June 2008 shareholders’ approval was sought for the possible sale of strategic assets. The management anticipated continued difficult economic conditions giving rise to liquidity shortage in the financial sector, they added. The shareholders of the company in an extraordinary general meeting of the company had passed a special resolution and authorized the Board of Directors of the Company to sell or alienate the company’s North Cement manufacturing unit. When the Dewan Cement Company was unable to obtain financial support from the financial institutions for commissioning of Line II in South region, it had to divert existing working capital towards completing the project. This further aggravated the cash flow situation forcing the management to call an Extra Ordinary General Meeting to seek permission for the Sale of North Plant. In order to improve liquidity and profitability of the company, the management tried to take certain steps such as increasing sales through export of cement to neighboring countries and curtailing financial cost by means of rescheduling of loans with financial institutions. During the year 2008 the company did not get any support from the financial institutions for commissioning of the company’s Line II in South region. The company was forced to divert its existing working capital towards completion of the Line II project. This further aggravated the cash flow situation forcing the management to seek permission from the stakeholders for the sale of North Plant. It is worth mentioning that Dewan Cement Limited (DCL) was incorporated in Pakistan as a public limited company in March, 1980. Its shares are quoted on the Karachi and Lahore Stock Exchanges since June, 1989. Dewan Group has made its move to the new business arena by acquiring the management of both Dewan Cement Limited and Dewan Hattar Cement limited. Both the companies were operating under the same management.