PACRA maintains Entity Ratings of Fecto Cement Limited

Fecto Cement has a single manufacturing capacity, located in north region, with an annual cement capacity of 0.945mln tons per annum. The company's market share stands at ~1% in operational cement capacity. The Company’s sales are majorly driven by local market fundamentals – an industry wide phenomenon. However, Fecto also exports a minuscule part to Afghanistan - viable export market given geographical location of the company. In FY22, cement sales witnessed a substantial decline due to uncertainty in government policies and recorded high inputs cost. Cement production declined by 3.6% and overall cement industry utilization stood at 56 per cent in FY22, compared to 72 per cent in the last year. With revenues of PKR 4,145 million in 1HFY23, company has reported net loss of PKR 122 million due to significant pressure on costs and teething problems of recently completed BMR. Going forward, along with improvement in volumes, managing direct & indirect costs and improvement in gross, operating and EBITDA margins remains vital for the company. Rating watch incorporates lease expiry of quarries and reported losses primarily due to pressures on cost. The financial risk profile would remain a predominant determinant in the ratings of the company. The quantum of debt has recently increased to finance BMR projects. Timely repayment of debt is imperative to hold the ratings, however, comfort can be attained from its significant portion incurred on concessionary fixed rates. Given the hike in policy rate, it is imperative that the company relies on internal cash generation for its working capital management. Fecto Cement has obtained exploration license for mining in Khushab but its capacity enhancement program is currently stalled owing to poor macroeconomic indicators as well as strained financial metrics intrinsic to the company. The company’s business profile remains critical as new era of expansions is changing the industry’s dynamics and company may lose its market share as expansion is put on hold
The ratings are dependent on improvement of company’s business volumes and margins. The company's improved business performance in current economic scenario – effective cost management, capacity expansion & retention of market share - remain vital for ratings.

About the Entity
Fecto Cement is headquartered in Karachi and the cement plant is established near Islamabad. It is a public listed company incorporated in 1981 and is engaged in manufacturing, marketing and selling of cement and clinker. Mr. Yasin Fecto owns controlling stake in the company. The overall control of the company vests in seven member board (BoD), including the CEO. The BoD comprises three independent directors and three non executive directors. Mr. Yasin Fecto, the CEO, is assisted by experienced management team.