The Pakistan Credit Rating Agency Limited
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Anam Waqas Ghayour

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PACRA Maintains Entity Ratings of Pioneer Cement Limited

Rating Type Entity
(24-Jun-22 )
(25-Jun-21 )
Action Maintain Maintain
Long Term A A
Short Term A2 A2
Outlook Negative Negative
Rating Watch - -

Pioneer Cement Limited (“The Company” or “Pioneer”) a public limited company incorporated in February 1986, commenced its operations in November 1994.The total installed capacity of cement in Pakistan is 69Mta with a further ~18Mta of capacity in the pipeline. This will take total production capacity to 87Mta by FY24.During 9MFY22 industry’s overall dispatches recorded at 40,779MT, declined by ~6% compared to same period last year. While domestic uptake of cement remains largely the same, major decrease in volumes are witnessed in exports due to higher ocean freight and uncertain political and economic situation especially in Afghanistan. Though the dispatches decrease the gross profitability of the sector improved to ~29% because of better translation of production cost and margins in prices. The overall industry’s future demand outlook remains stable, in view of the infrastructure projects in the pipeline. Pioneer cement operates with three manufacturing lines, in north region, with the capacity of 5.2Mta. During 9MFY22, the Company recorded the revenue amounting PKR 22.5bln (9MFY21: PKR 15.6bln) showing 44% growth. Cost of sales for the period increased due to higher input costs, mainly on account of hike in energy prices. To mitigate the adverse impact of increased energy cost, the Company substituted costlier imported coal with cost effective local and Afghan-origin coal and, has placed maximum reliance on captive power generation plants. Due to better pricing and cost-effective measures the coverage ratios improved relying on improved FCFOs. The free cash flows of the Company has improved and the relative gap with outflows on account of debt repayments has reached, though room for further improvement is there.
The ratings reflect the squeezed financial profile of the company. This emanates from the high leveraging scale, as a result of the expansion related debt and captures the strains in the financial profile. It is important to (i) improve equity base in line with the enhanced leveraging, ii) cash flows generation iii) margins, and (ii) optimal utilization of existing and new lines. Timely repayment of mark up and principal is essential for the ratings.

About the Entity
Pioneer Cement is an affiliate of Mega group. The group owns 47% stake in Pioneer Cement through Vision Holding Middle East Limited. The group, led by Mr. Habibullah Khan, has key interest in shipping and logistics business, in addition to exposure in real estate, ports terminal, food and energy sectors. Pioneer Cement is listed on PSX and has a well spread shareholding pattern. The overall control of the Company vests in eight-member board of directors including the CEO and three independent directors. Syed Mazher Iqbal, Chief Executive Officer of the Company, is an experienced individual with professional experience of several sectors of auto, fertilizer and cement.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.