The Pakistan Credit Rating Agency Limited
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Bazah Tul Qamar

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PACRA Assigns Initial Ratings to Fauji Cement Company Limited

Rating Type Entity
(15-Mar-22 )
Action Initial
Long Term A+
Short Term A1
Outlook Stable
Rating Watch -

Fauji Cement’s ratings hinge on its sustained market presence in the cement sector. The Company captures an adequate market share of 8.07% in North & 6.06% overall. Company is currently operating with two production lines, with an annual capacity of 3.5mln tpa, in Jhang Bahtar, District Attock near Islamabad. The Cement sector’s dispatches have recorded splendid growth and surged by 20% in FY21 as demand in the domestic market accelerated. Also the local industry’s future demand outlook is positive, in view of the infrastructure projects in the pipeline. Export is another avenue. Industry-wide Export has gone up as a new export window is created in the Bangladesh market. Over the years, company has been able to maintain a growth trajectory. The Company’s revenues witnessed an increase (1QFY22: PKR 6.9bln, FY21: PKR 24.2bln, FY20: PKR 17.2bln) attributed to an uptick in sales volumes, positive price indicators and, reinvigorating economy. The Company managed to recoup previous losses and reported profits of PKR 1.36bln and PKR 3.5bln in 1QFY22 and FY21 respectively. In order to propel growth in line with cement industry, management has announced further green field expansion of 6,500 TPD, near DG Khan. Estimated cost of project is ~PKR 32.4bln out of which ~63% will be debt financed. Financial Close has already achieved in April-21. The project is expected to be operational by FY 2024. The Company is in the process of merger with Askari Cement, transaction is approved by BoD however the scheme of amalgamation is submitted in High Court, for final approval. Company keeps a fairly low leveraged financial profile, however adding up of further leveraging due to expansion will potentially impact the financial risk profile of the Company, while expected to remain manageable. Further, the Ratings assigned to Fauji Cement also draw support from the strong financial profile of the Company’s sponsor, Fauji Foundation having a presence across multiple sectors.
The ratings remain dependent on upholding company's market position along with sustenance of business volumes, margins and achieving optimal utilization of production capacities. Going forward, sustainability in profits for timely repayment of debt remains vital.

About the Entity
Fauji Cement Company Limited is a public listed company established in 1992. The company is listed on Pakistan Stock Exchange (PSX). Company has been set up with the primary objective of manufacturing, producing, preparing, treating, processing, refining, selling, transporting and exporting different kinds of CEMENT and their allied products. Fauji Cement is majority owned by sponsor group Fauji Foundation. The other major proportion of shareholding is of general public and financial institutions that owns 52%. The overall control of the company vests in eight member’s board of directors - including the Chief Executive – Mr. Qamar Haris Manzoor, who holds a Masters degree in Chemical Engineer from US and possess over 3 decades of experience in plant and project management. Chief Executive is supported by a team of experienced professionals.

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.