Displaying items by tag: Pakistan

The old saying goes that nothing is certain except for death and taxes. But maybe that should be cement and taxes. Paying your taxes is something most people and companies just get on with, perhaps with some grumbling or perhaps not, but certainly with little press. So two news stories popping up in the same week about cement plants with tax issues is out of the ordinary.

The first concerned Lucky Cement’s battle in Pakistan to keep one of its plants open following accusations of underpaying its taxes. The local tax office tried to shut the Pezu plant down for not paying its property tax. The cement producer hit back with a restraining order from the provincial high court. The second detailed efforts by the Ethiopian authorities efforts to claw back US$10m from a local cement producer accused of deliberately understating its profits. In both cases it’s hard to tell if there is an obvious right or wrong party. Yet if these kinds of stories are hitting the local press headlines then either something has gone wrong or both parties are digging in for a fight.

Looking over a longer time frame two major stories about tax have been doing the rounds over the last year in the industry news. India’s Goods and Services Tax (GST) is a classic example of how cement producers sometimes have to deal with changes to existing regulations. It received another outing this week in the form of the credit agency ICRA’s latest forecast. It explained how the introduction of the new tax, a consolidation of other existing indirect taxes, had slowed production in the second quarter of the Indian financial year in 2017 - 2018.

The other example from a large cement producing country was US President Donald Trump’s cut to federal corporate tax in December 2017. The tax cut was expected to particularly benefit companies that produce materials, like building materials manufacturers. It prompted HeidelbergCement to say in early January 2018 that it expected to see a boost to its profits in 2019. Warren Buffet, the chairman of Berkshire Hathaway and owner of insulation producer Johns Manville amongst other companies, put it bluntly when he said in his 2017 annual report that nearly half the gain of his company’s net worth came from the changes to the US tax system.

Multinational companies, including some cement producers, face issues when dealing with different rules and regulations between the various countries that they operate in. However, sometimes unfairly, sometimes not, large companies also hold a reputation for trying to avoid paying tax.

In this context it’s interesting to look at how LafargeHolcim says it approaches the issue. The company published its tax principles in 2016 where it talks about being responsible and that it, “…accepts tax as a necessary and required contribution to society.” It then talks about the necessity of transparency and good relationships with tax authorities. The same year it declared a total tax bill of Euro726m versus total sales revenue of Euro23bn. By contrast Cemex UK in its tax strategy talks about how it follows the US Sarbanes Oxley Act 2002, which applies a more stringent international accounting and auditing standard. It feels far more honest when it says that it aims to minimise the tax burden upon its shareholders by using methods outlined by the UK government. Taxes may be a certainty but nobody wants to pay a penny more in taxes than they have to.

Pakistan: Local residents have protested about air pollution from the Kohat Cement plant. They demanded that the plant install air filters as soon as possible, according to the Dawn newspaper. The protestors also alleged that the company’s employment of local workers had dropped to 5% from 75% following its sale. The cement company says that it has hired a Chinese engineering firm to run a survey of its emissions. In 2016 the Environmental Protection Agency ordered Kohat Cement to stop production as its dust control unit was ‘out of order.’

Pakistan: Lucky Cement has obtained restraining orders from the Peshawar High Court to prevent its Pezu plant being closed by the Excise and Taxation Department for not paying a US$135,000 property tax bill. A team from the Excise and Taxation Department attempted to close the site on 23 February 2018, according to the News International newspaper. The cement producer says that the plant continues to produce cement and despatch its products. The tax office has launched a drive to target tax defaulters in the region. It alleges that it has been chasing Lucky Cement’s tax bill for the past six years.

Pakistan: Fecto Cement plans to build a new 6000t/day cement plant at Palai in Malakand. The project will also include a waste heat recovery unit.

Pakistan: The All Pakistan Cement Manufacturers Association (APCMA) has expressed its concern over a ‘sharp’ rise in coal and fuel prices have increased the production cost of cement. Sources quoted by the association have blamed the implementation of supply side measures in China to limit its coal mining capacity, according to the Nation newspaper. A recent surge in coal prices has also followed stricter local rules on coal transportation. The association has called on the government to avoid ‘disruptive policies’ that impact construction growth.

Pakistan: DG Khan’s sales grew by 8% to US$154m in the second half of 2017 from US$142m from in the same period of 2016. However, its profit after taxation fell by 21% to US$31m from US$40m.

Pakistan: A consortium of investors including Denmark’s FLSmidth have purchased a stake in Power Cement. The investors include the Danish Investment Fund for Under-Developed Countries (IFU) and IFU Investment Partners (IIP). As part of the deal the board of the cement producer has approved the appointment of Anders Paludan as a director.

Pakistan: The local cement industry has asked the government to increase the custom duty on imported clinker to support local production as export rates continue to decline. The industry has also recommended that cement importers should be registered with the Pakistan Standards and Quality Control Authority (PSQCA) and country of origin bodies, according to the Nation newspaper. Falling exports in Afghanistan have been blamed on Iranian competition and high local energy costs.

Pakistan: Mega Conglomerate says it plans to buy an 87.5% stake in Dewan Cement. The buyer operates in the dairy and real estate sectors. Dewan Cement operates two cement plants. Bestway Cement and Fecto Cement have previously made bids for Dewan Cement.

Pakistan: Lucky Cement’s profit after tax fell by 2% year-on-year to US$77.6m in the half year to 31 December 2017 from US$79m in the same period in 2016. The cement producer said that its cost of sales had increased by 21% due to rising coal and other fuels prices. Its sales revenue grew by 5.2% to US$297m from US$283m. Its cement production rose by 5.4% to 3.68Mt from 3.49Mt.

The company completed a new 1.25Mt/yr production line at its Karachi cement plant in December 2017. It is currently seeking government approval to build a new 2.3Mt/yr plant in Punjab Province. However due to the delay it is considering expanding its Pezu plant by 2.3Mt/yr instead. The cement producer also expanded its grinding plant in Iraq by 0.87Mt/yr to 1.74Mt/yr.