PACRA Maintains the Entity Ratings of Cherat Cement Company Limited

Cherat Cement’s Ratings reflect its presence in the cement sector emanating from its decent market share (~7%) predominately in the north region. Overall, the Cement sector witnessed a negative growth of ~16% in total dispatches whereas export cement declined by ~13% during FY23. However, contrary trend was witnessed in 1QFY24, with local cement dispatches increased by ~18% and export dispatches by ~72% compared to same period previous year. The inflationary pressure during FY23 contributed towards driving the demand for Cement downwards. Going forward, the trend of sale volumes is expected to recover in FY24 owing to improvement in economic conditions. During FY23, the Company’s local cement dispatches were recorded at 2.871mln tons (FY22: 3.552mln tons) registering a decline of 19%. However, during 1QFY24, the Company’s local cement dispatches were recorded at 0.699mln tons (1QFY23: 0.706mln tons) registering a minor decline of ~1% despite the improvement in industry volumes. Consequently, the Company’s revenues soared to PKR 10,071mln & PKR 37,386mln at the end of 1QFY24 & FY23, respectively on account of upward adjustment in cement prices (1QFY23: PKR 9,050mln, FY22: PKR 32,085mln). Company managed to improve margins in the said period on back of efficient cost management through the installed solar power plant of 13.05MW. Moreover, the BoD have approved to enhance the capacity of the solar power plant by 10.5MW leading to total installed capacity to reach 23.55MW. The Company's leveraging is currently at an adequate level, especially with the repayments being made. Moreover, keeping in view the economic turndown the management has decided to delay the greenfield expansion project. The financial risk profile incorporates liquidity profile, evident from healthy cash flows and improved coverages. Further, the Ratings assigned to Cherat Cement also draw support from the strong financial profile of the Company’s sponsor, Ghulam Faruque Group having a presence across multiple sectors mainly including Cement, Sugar, Packaging, Software Solutions, Air Conditioning and specialized engineering equipment.
The ratings remain dependent on upholding company's market position along with sustenance of business volumes, margins and achieving optimal utilization of production capacities. The company's good business performance as compared to other players in current stretched economic scenario - challenges on demand front - remains vital for ratings.

About the Entity
Cherat Cement - a Ghulam Faruque Group (GFG) Company - commenced operations in 1985. The company is engaged in the manufacturing, marketing and sale of Ordinary Portland Cement. The company is majority owned by GFG through associated companies and family members. The overall control of the company vests in eight-member Board of Directors (BoD), including the CEO. The BoD comprises six non-executive directors, including three independent directors, out of which three are Ghulam Faruque family members including the CEO. Mr. Azam Faruque, the CEO, is the grandson of Mr. Ghulam Faruque, and has been associated with the company since 1992. Mr. Faruque is supported by a team of professionals with relevant experience in the cement industry.