PACRA Maintains Entity Ratings of Gharibwal Cement Limited.

Gharibwal Cement (the Company) has annual production capacity of 2.1mln tpa. The Company has been conducting its business by selling cement to the localities located in close vicinity of the plant located in Ismailwal District Chakwal. Gujranwala division remained the Company’s key market. The cement sector latest period 1HFY24 reported a reduction of 10% in cement production reflecting on economic downturn. Also, increase in the prices of all construction materials has adversely impacted the demand of cement. Going forward, same trend is expected to continue throughout the remaining fiscal year owing to economic constraints and political uncertainty. In line with the industry trend, the Company recorded a decrease of 11% in total dispatches for 1HFY24. This decrease has led to a dip of 2% in topline (1HFY24: PKR 9,226mln, 1HFY23: PKR 9,409mln, FY23: PKR 18,315mln, FY22: PKR 16,194mln). Gross Profit Margin for the latest period ended December 2023 was recorded at 16.2% (1HFY23: 25%, FY23: 20.7%, FY22: 23.4%). Net Profit Margins followed the same trend during 1HFY24 and recorded a dip of 5% (1HFY24: 7.4%, 1HFY23: 12%, FY23: 6.7%, FY22: 8.4%).
The Company has equity base of PKR 22.3bln whereas it's leveraging stands at 6%. The Company has completed the construction and operations of Waste Heat Recovery (WHR) plant that generates electricity up to 12MW from waste hot gases of the process and 8MW from coal fired system. Keeping the current phase of expansion in view, Gharibwal is working on its line II expansion project to expand its current capacity by 10,000 TPD in order to maintain their market presence in the industry. The financial profile remains adequate as long-term leveraging expected to increase if expansion would be financed with debt mix. The ratings draw comfort from sponsor families, having prime focus of the Company.
As depicted by the volumetric dispatches made during 1HFY24, going-forward the cement industry is expected to operate at lower cement dispatches owing to slow paced infrastructural development which will consequently diminish cement demand. Thus, posing a concern for the cement manufacturers. The ratings are dependent on upholding the Company’s business vis-à-vis financial risk profile in the current economic scenario.

About the Entity
Gharibwal Cement Limited, operating with cement capacity of 2.1mln tpa. The Company is majority-owned by Mr. Tousif Peracha (~54%), founder of Gharibwal Group, followed by Rafique Family (~33%). Gharibwal Group has interests in glass manufacturing, lubricants, and real estate projects locally as well as abroad and shipping and truck manufacturing in Nigeria. The Company’s seven-member BoD, including one independent director. Peracha family has four representatives, including the CEO. Two other directors represent Rafique Family on board. Mr. Tousif Peracha, the CEO, is supported by a team of experienced individuals with long association with the Company.