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South Valley compares between borrowing, increasing capital to finance 2nd cement line - Daily News Egypt

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South Valley compares between borrowing, increasing capital to finance 2nd cement line

The company targets to increase its production capacity to 3m tonnes, and is currently discussing the cost of establishing a second cement line after the flotation of the pound, says Mekati


Ahmed El-Mekati, board member of South Valley Cement Company, said that his company is working on studying the investment cost of its new cement production line with a capacity of 1.5m tonnes, as the cost of importing the production line’s components has increased as a result of the Egyptian pound’s flotation.

He continued that the company’s management will hold a meeting this month to discuss the launch of the new production line, and study the available financing alternatives. South Valley Cement Company is comparing between borrowing from banks and increasing its capital in the stock market.

He revealed that the company will establish the new production line at its factory in Beni Suef’s industrial zone, bringing the production capacity of the factory up to 3m tonnes annually. The capacity of the current production line reaches 1.5m tonnes per year.

Mekati noted that his company won the new cement line licence after Misr Beni Suef Cement withdrew from the auction. The implementation of the new line is expected to take about three years.

South Valley Cement Company was granted the licences to build the new production facility for EGP 160.3m, which is the minimum value of the licences proposed by the Industrial Development Authority.

Mekati referred to the different views of major cement producers in Egypt with regard to the attractiveness of obtaining new cement licensing. Some companies believe that the cost is high, while others believe the market cannot absorb an increase in cement production; however, South Valley Cement Company plans to expand its production capacity within the next three years.

El Sewedy Cement Company, South Valley Cement Company, and Cement Egypt won the tender posed by the Industrial Development Authority for three licences to build new production facilities for cement. The authority said the three winning companies were competing against three other companies: Misr Beni Suef, Royal, and Chinese Jochi.

On the other hand, Mekati pointed out that South Valley Cement Company succeeded in increasing the designed capacity of the current production line from 1.2m tonnes to a maximum operational capacity of about 1.5m tonnes annually to meet the high demand for cement.

Sigma Capital Company predicted that the new production expansions of South Valley Cement would increase the fair value of the company’s share to EGP 6.44 per share.

Sigma Capital added that South Valley will operate the new line at its maximum capacity of 1.5m tonnes annually by 2019, with an average run rate of 90% by 2020.

 

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