logo
The Pakistan Credit Rating Agency Limited
Press Release

Date
18-Dec-18

Analyst
Sehar Fatima
sehar.fatima@pacra.com
+92-42-35869504
www.pacra.com

Applicable Criteria

Related Research

Disclaimer
This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains Entity Ratings of Fecto Cement Limited

Rating Type Entity
Current
(18-Dec-18 )
Previous
(07-May-18 )
Action Maintain Initial
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

The ratings reflect Fecto Cement’s adequate business profile supported by healthy sector dynamics over last few years. The company is operating with a single manufacturing unit in the North region. The company has announced green-field expansion, which is more than double its existing capacity, will be located in Malakand District. This will allow company to cater the demand of adjoining markets in a cost-efficient manner. The management is eying an international investment group to be partner in the project (green-field expansion). The debt to equity ratio planned for the green field project is 70:30. The project is deemed to be operational by FY21. Fecto Cement is also diversifying into other sectors – formalities yet to be finalized. The business profile of the company is expected to remain adequate over the medium term. However, vigilant monitoring is required in improving business margins and achieving cost efficiencies. The company’s financial risk matrix is expected to stay adequate. Timely cash flows from planned projects, in the context of overall leveraging, are vital for the ratings.

The ratings are dependent on upholding of company’s business volumes and margins. The acquisition of planned debt in phased manner is vital for financial risk matrix. The company's improved business performance in current stretched economic scenario - challenges on demand front - remains vital for ratings.

About the Entity
Fecto Cement, operates with 1.5% market share in the existing cement capacity of the country. The company is public limited company incorporated in 1981 and is engaged in manufacturing, marketing and selling of cement and clinker. Mr. Yasin Fecto, identified as the man at the last mile, owns controlling stake in the company. The overall control of the company vests in seven member board of directors (BoD), including the CEO.

The BoD comprises three independent directors, whereas Mr. Rohail Ajmal is the representative of Saudi Pak on board. Mr. Yasin Fecto, the CEO, is assisted by experienced management team.

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.