PACRA updates the Entity Ratings of Pioneer Cement Limited | Stable Outlook

Pioneer Cement Limited (“The Company” or “Pioneer”) is a public limited company incorporated in February 1986, commenced its operations in November 1994. Pioneer cement operates with three manufacturing lines, in north region, with the capacity of 5.2Mta. The total installed capacity of cement industry in Pakistan is 80Mta with a further ~7Mta of capacity in the pipeline. This will take total production capacity to 87Mta by FY24. During 9MFY23 industry’s overall dispatches recorded at 33.6mln tons, declined by ~17.7% compared to same period last year. While domestic uptake of cement reduced by 15.6%, major decrease in volumes is witnessed in exports due to higher ocean freight and uncertain political and economic situation. Though the dispatches are reduced, the gross profitability of the sector improved due to better translation of production cost and margins in selling prices. The overall industry’s future demand outlook remains stable, in view of the infrastructure projects in the pipeline. The Company’s volume decrease 18.5% during 9MFY23 in line with the industry trend. However, the Company clocked its net revenue at PKR 27.8bln (9MFY22: PKR 22.5bln) showing 23% growth in revenue term due to better retention prices. Despite the increased input cost majorly energy across the industry, the gross margins of the Company remains stable as the Company substituted costlier imported coal with cost effective local and Afghan-origin coal and, has placed maximum reliance on captive power generation plants. Due to better pricing and cost-effective measures the coverage ratios improved relying on improved FCFOs. This narrowed the gap of debt repayments, though room for further improvement is there.
Stable outlook of the Company depicts improved free cashflows and hence enhanced ability to repay timely. However, it is important to note that the following factors (i) making good margins ii) sustaining cash flows generation iii) low leveraging, and (iv) optimal utilization of existing and new lines remains imperative for the timely repayments as well as the ratings.

About the Entity
Pioneer Cement is an affiliate of Mega group. The group owns 47% stake in Pioneer Cement through Vision Holding Middle East Limited. The group, led by Mr. Habibullah Khan, has key interest in shipping and logistics business, in addition to exposure in real estate, ports terminal, food and energy sectors. Pioneer Cement is listed on PSX and has a well spread shareholding pattern. The overall control of the Company vests in eight-member board of directors including the CEO and two independent directors. Syed Mazher Iqbal, Chief Executive Officer of the Company, is an experienced individual with professional experience of several sectors including banking, insurance, food, tyre and cement. The Chief Financial Officer (CFO), Mr. Waqar Naeem, is a Chartered Accountant and is supported by professional and experienced team.