The Pakistan Credit Rating Agency Limited
07-May-18
Analyst
Sehar Fatima
sehar.fatima@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
- Methodology | Corporate Rating Methodology | Jul-17
- Methodology | Correlation between long-term and short-term rating scale | Jun-17
- Methodology | Criteria Modifiers | Jun-17
Related Research
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PACRA Assigns Initial Entity Ratings to Fecto Cement Limited
| Rating Type | Entity | |
|
Current (07-May-18 ) |
||
| Action | Initial | |
| Long Term | A- | |
| Short Term | A2 | |
| Outlook | Stable | |
| Rating Watch | - | |
The ratings reflect Fecto Cement’s adequate business profile supplemented by favorable sector dynamics. 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. The project is planned to be financed through debt to equity ratio of 80:20 with planned commencement in FY20. The equity portion is to be financed through sponsor equity, irredeemable preference shares and internal cashflows from existing manufacturing unit. The company is establishing second manufacturing unit in Malakand District. This will allow company to cater the demand of adjoining markets in a cost-efficient manner. The business profile of the company will be supplemented by volumetric increase in company’s sales and optimistic demand pattern of domestic market. Furthermore, the Company’s increased capacity utilization level is a positive. The Company’s financial risk will be managed through successful commissioning of new line. Timely completion of project and successful business operations remain important for the company’s viability.
The ratings are dependent on the management's ability to (i) uphold margins, and (ii) optimal utilization of existing line. Any significant deterioration in the sector’s outlook particularly any unfavorable change in demand and expansion matrix, thereby exerting pressure on prices and margins, may negatively impact the ratings. Upholding governance practices remains important.
About
the Entity
Fecto Cement, operates with 1.7% 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 sale of Ordinary Portland Cement. 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 nine member board of directors (BoD), including the CEO. The BoD comprises six 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.