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PACRA Maintains Entity Ratings of Flying Cement Company Limited

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Lahore, November 15, 2019 (PPI-OT): Flying cement operates with one manufacturing unit, having capacity of 1.2mln tpa, in the North region. Lately, the Company had completed BMR which resulted in improving margins in initial quarters of FY19. Furthermore, Waste Heat Recovery plant is planned to commence in Dec-19. The Management is expecting improvement on the efficiency side. The Company announced cement capacity expansion plan in FY16 but delayed it due to a number of announced capacities by majority cement players. During FY19, industry dynamics especially for cement players operating in north region have shifted significantly on account of fluctuating cement prices, increase in FED on coal import and depreciation in Pak Rupee against other currencies.

Along with these factors, muted local demand has affected the company’s sales whereby volumes went down. Margins witnessed decline; largely in line with the cement players operating in north region. The financial risk matrix remained adequate; long term finance being acquired in pursuit of expansion. The comfort is taken from principle repayments arising after commencement of new line and subsequent additional cash flows. The equity base strengthened attributable to recent revaluation and equity injection by sponsors; further equity strengthening is on the cards. Going forward, leveraging is expected to increase but will remain range bound.

The ratings are dependent on sustained profile of the company’s business and financial risk profile; strengthening of equity base is essential. Any derivation from the envisaged financial structure (debt equity ratio, cash coverage etc) would be considered negative. Any significant deterioration in the sector’s outlook particularly continuation of slowdown in industry’s dispatches, interest rate fluctuation and delay in infrastructure projects may affect the ratings. Industry’s dynamics encompassing expected challenges of substantial decline in local demand or deterioration in cement prices will negatively affect the ratings.

For more information, contact:
Analyst
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
Email: hammad.rashid@pacra.com
Web: www.pacra.com

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