Aug. 4 (Bloomberg) -- Lucky Cement Ltd., Pakistan’s biggest producer, plans to start its first overseas factory in Africa by 2011 to take advantage of a construction boom.

“The African market is where the future growth for Pakistan lies,” Chief Executive Officer Muhammad Ali Tabba said yesterday in an interview in Karachi. “Demand is growing and there are not many plants in the region.” He declined to give investment, capacity or location details of the planned factory.

Lucky, which exports to South Africa, aims to use the African factory to export to Europe, Tabba said, without elaborating. Africa, with a combined gross domestic product of $2.68 trillion and 987 million people, is forecast to expand 4.5 percent next year, compared with 2.8 percent in 2009.

“Lucky has the first-mover advantage in capacity building, exploring export markets and providing better quality with competitive prices,” said Rehan Khan, who has a “buy” rating on the stock at First Capital Equities Ltd. in Karachi.

Lucky Cement’s shares, which more than doubled this year, rose as much as 3.7 percent to 77.38 rupees before closing at 74.15 rupees, 0.7 percent lower.

Africa Demand

Africa’s cement demand exceeds supply by as much as 7 million tons a year, Tabba said. The construction industry there is growing at an average annual rate of 25 percent, he said.

Lucky Cement may also acquire some local rivals to expand capacity at home, Tabba said.

“We are evaluating good plants which are distressed,” Tabba said, without naming the companies. “By next year, we may go and acquire some of them.”

Of the 20 cement makers on the Karachi Stock Exchange, Flying Cement Co., Gharibwal Cement Co. and Dandot Cement Co. are financially distressed, according to First Capital’s Khan.

Flying Cement’s nine-month net loss widened to 140.5 million rupees in the period ended March 31 from 99.7 million rupees a year ago, according to its financial report. Gharibwal’s loss for the period widened to 168.7 million rupees from 124.8 million rupees a year ago.

Pakistan’s cement exports rose 47 percent in financial year ended June 30 to a record 11.38 million metric tons, according to First Capital.

India, Sri Lanka

Lucky, which accounts for a third of Pakistan’s overseas cement sales, exported 57 percent of its production to the Middle East, Africa, Sri Lanka, India and Afghanistan in the nine months ended March 31. Sales to India, Sri Lanka and Egypt will continue to grow, as demand from the Middle East slows, Tabba said.

“Africa is a good focal point since the Middle East, which has been a strong market for us, is seeing an increase in its own production capacities,” he said.

Lucky Cement raised $109.3 million selling shares overseas last year and said it would use the funds to increase production capacity to 9 million tons in three years from 6.55 million tons. Lucky Cement’s net income rose 58 percent to 1.13 billion rupees ($14 million) in the three months ended March 31.

The cement maker’s full-year profit may rise 60 percent, First Capital’s Khan estimated. The company is expected to announce full-year earnings tomorrow.

To contact the reporter on this story: Farhan Sharif in Karachi, Pakistan fsharif2@bloomberg.net.

Last Updated: August 4, 2009 05:45 EDT