PACRA Updates Entity Ratings of Fauji Cement Company Limited

Fauji Cement Company Limited (FCCL) ratings depict the Company’s performance towards conquering the third spot in the local cement industry in terms of installed capacity and market share. Moreover, the presence of Fauji Group at the upper echelon further bolsters the overall financial strength. It is noteworthy to mention that the Company successfully commissioned its Greenfield Cement Plant in November 2023, having production capacity of 6,500 TPD at D.G Khan. With commencement of operation of new line, the cumulative cement production capacity of the Company has increased to ~10.6 MTPA. Furthermore, the new greenfield plant will provide access to the South region which would be beneficial going forward. Due to the slowdown in the economy, the cement industry witnessed a decline of ~15.7% in cumulative dispatches during the year (FY23: ~44.5mln MT, FY22: ~52.8mln MT). Local dispatches declined by ~16.0% to ~40.01mln MT during FY23 from ~47.63mln MT in FY22. Similarly, Export volumes dwindled by ~0.7mln MT during the period (FY23: ~4.56mln MT, FY22: ~5.25mln MT). The overall decline in the volumes was due to soaring inflation in the country that led to demand constraints. Furthermore, the political instability hindered the developmental activity in the country that adversely impacted the cement sector. Analogous to the industry’s outcome, the Company’s cumulative dispatches declined by ~14.30% during FY23 as compared to the same period last year (FY23: ~4.8mln MT, FY22: ~5.6mln MT). However, despite negative growth, the Company along with its peers reported positive growth in Net Revenues in value terms owing to higher retention prices resulting in sustained Gross Margin at 30.0%. FCCL reported Net Revenues of PKR 68,069mln (FY22: 54,243mln) witnessing a growth of 25%. The transition into FY24 brought some relief for the cement sector in the form of growth in total industry volumes of ~10% during the first half (1HFY24: ~23.88mln MT, 1HFY23: ~21.76mln MT). Recovery in both local and exports contributed towards the positive shift. FCCL’s cumulative dispatches increased by ~5% to ~2.58mln MT (1HFY23: ~2.46mln MT) resulting in Net Revenues of PKR ~40,352mln (1HFY23: PKR ~33,673mln). Stable pricing during the first half led to further improvement in gross margins of the Company recorded at 32%. The Company has penetrated the local cement industry and increased its market share to ~12% in terms of dispatches during FY23. The management is committed towards its cost optimization strategy to further enhance the capacity utilization and profitability of the Company. The Company’s leveraging stood at 36.5% as a result of debt to support the expansion.
Going forward, the industry is expected to witness a negligible growth trend during the remaining half of FY24. The ratings remain dependent on upholding the Company's market position along with sustenance of business volumes and margins.

About the Entity
Fauji Cement Company Limited is a public listed company established in 1992. The Company has been set up with the primary objective of manufacturing, selling and exporting of different types of cement products. Fauji Cement is majority owned by sponsor Fauji Foundation and other group companies (67%) while remaining shareholding comprises of general public (15%) and institutions (18%). The overall control of the company vests in eight member’s board of directors - including the CEO – Mr. Qamar Haris Manzoor, who possesses over three decades of experience in plant and project management. He is supported by a team of experienced professionals.