The Pakistan Credit Rating Agency Limited
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Uswa Sikandar

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PACRA Maintains Entity Ratings of Flying Cement Limited

Rating Type Entity
(29-Apr-22 )
(07-May-21 )
Action Maintain Maintain
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch Yes Yes

Flying cement operates with one manufacturing unit, having capacity of 1.2mln tpa, in the North region. The Cement sector’s dispatches have recorded splendid growth and surged by 21% in FY21 as demand in the domestic market accelerated. The industry’s future demand outlook is positive, in view of the infrastructure projects in the pipeline. Cement sector announced third phase of expansion (~18 mln tpa) which is expected to increase with more players joining the lane. Flying Cement announced cement capacity expansion plan in FY16 which got delayed due to a number of unfavorable economic conditions. As per management , after BMR, total capacity will be 11,700tpd (Clinker) which will achieve COD by the end of current year. The Company has successfully started commercial operations of captive power plant of 12 MW at its site in Distt. Khushab in January 2022. This is in addition to completion of WHRPP done last year. The Company is picking up pace. In 1HFY22, Flying Cement recorded profits of PKR 464mln attributable to augmented supply side, better cement prices and less reliance on imported coal. Hence, margins took steep rise. The financial risk matrix remained manageable as long-term finance being acquired in pursuit of expansion; short term finance already reduced. The equity base improved attributable to equity injection by sponsors through right issue of PKR 2 billion. In cognizance thereof, sponsors have subscribed to substantial amount of PKR 1.56bln of right shares to strengthen the equity base of the Company. Company is in the process of issuing another right issue of PKR 3 billion to finance its expansion and working capital needs. Going forward, sustainability in margins and cash flows remains vital to the ratings. Rating watch incorporates delays in expansion projects and pressure on financial risk matrix.
The ratings are dependent on sustainability of the company’s business and financial risk profile; timely repayments of long-term loans and strengthening of equity base is vital. Any derivation from the envisaged financial structure (debt equity ratio, cash coverage etc.) would be considered negative.

About the Entity
Flying Cement Company Limited formerly known as “Zaman Cement Company Limited”, listed on PSX, started commercial production in 2005. Flying Cement is engaged in the manufacturing and sale of Ordinary Portland Cement. Currently, the company is one of the small players in industry, having 2.3% share in North region’s cement capacity (operational). Flying Cement is majority owned by sponsor family members. The overall structure vests with eight board members including CEO. Three directors are Flying Cement’s executives – CEO, Director Technical & Administration, Director Finance, Director Marketing – while five are non-executive directors, including three independent and one female director. The CEO, Mr. Agha Hamayun Khan, Master’s in Economics, is associated with the group from 24 years. Mr. Kamran Khan, chairman of the group is Graduate in Science, having 37 years of experience and handles Technical matters and capacity expansion of the company. Mr. Momin Qamar, Director Finance, Graduate in Business and having 37 years of experience. Mr. Ali Alam Qamar is also looking after the financial affairs of the Company - Graduated from SOAS University of London & done courses from Harvard University & London School of Economics.

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