Analyst
Sehar Fatima
sehar.fatima@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
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.