PACRA Assigns Initial Entity Ratings to Kohat Cement Company Limited
Lahore, December 29, 2017 (PPI-OT):Kohat Cement’s ratings reflect the market positioning – mid-tier (6% market share) cement player. The Company has cost-efficient operational framework reflected in robust EBITDA margins (leading position only in recent year) and strong profitability. The Company has announced capacity expansion of 2.3mln tpa with an estimated cost of PKR 13bln. The financing is planned with debt to equity ratio of 43:57 – majorly equity driven. This will assist the Company in defending its market share in the ongoing significant expansion trend.
However, given current low capacity utilization (FY17: 73.2%, FY16: 72.9%) as compare to industry, the management’s plan to absorb the increased supply of cement from expansion remains important. The Company’s performance remained strong in line with other players in cement industry. The Company’s financial risk remains fairly low primarily due to low leveraged capital structure. Going forward, leveraging is expected to remain at moderate level.
The ratings are dependent on upholding of the company’s business vis-a-vis financial risk profile. Any significant deterioration in the sector’s outlook particularly any unfavourable change in demand and expansion matrix, thereby exerting pressure on prices and margins, may negatively impact the ratings. Upholding governance practices remains important.
For more information, contact:
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425