PACRA Upgrades the Entity Ratings of Pioneer Cement Limited

Pioneer Cement Limited ("The Company"), was established in February 1986 and operational since November 1994, is a publicly listed company. It operates three manufacturing lines in the northern region, boasting a total capacity of 5.2mln MT. The Company carries a strong brand name, which is well received by the market. In FY24, the cement industry saw a 1.6% rise in total dispatches to 45.3 MT. driven by a 55% surge in exports amid favorable international prices and rupee devaluation. However, domestic dispatches declined by 4.6% due sluggish construction activity. In 3QFY25, total dispatches fell by ~1.48%% to 34.00 MT, with local sales dropping 6.59%, while exports grew by ~21% to sustain capacity utilization. Despite the drop in overall volumes, cement manufacturers managed to maintain their revenue base through better retention prices and the implementation of cost-effective measures, which collectively supported their ability to sustain profit margins. The Company's production volume for 3QFY25 stood at 1,574mln MT, reflecting a 13.51% decline compared to 1,820mln MT in 3QFY24. This decline is attributed to market conditions in general and the Company's strategy in particular. The management's strategic focus on higher retention through a shift to premium markets has been designed to enhance profit margins, even amidst a decline in volumetric sales. Alongside its refined sales approach, the Company has implemented various cost-efficiency measures. These include shifting of major portion of foreign coal with local coal, leveraging its cost advantages. Additionally, the Company has transitioned from reliance on the national grid to captive power generation, further reducing energy costs. To address rising input costs, particularly in packaging, the Company proactively adjusted its poly-to-paper mix, mitigating the impact of increasing craft paper prices. These measures collectively contributed to maintain higher gross profit margins, which reached 32.90% in 3QFY25, compared to 33% in FY24 and 26% in FY23. Similarly, net profit margins continued to improve, standing at 15.20% in 3QFY25, up from 14.60% in FY24 and 7.20% in FY23, reflecting the success of these strategic and operational adjustments. Furthermore, the management has been actively deleveraging the balance sheet, significantly reducing financial stress from prior years. By the end of March 2025, the Company's leverage ratio declined to 16.9% compared to 21.5% at the end of March 2024. Additionally, the ongoing reduction in policy rates is expected to further enhance financial flexibility and lower finance costs, providing additional support to profitability.
The rating upgrade depicts the management's commitment towards improvement of the Company's performance, which is evident from the continuous rising trend in the margins and sustenance of market position in a challenging macroeconomic environment.

About the Entity
Pioneer Cement, affiliated with the Mega Group, has 47% ownership held by Vision Holding Middle East Limited, led by Mr. M Habibullah Khan, the chairman of the Group. The Mega Group, under Mr. M Habibullah Khan's leadership has diverse interests spanning shipping, logistics, real estate, port terminals, food, automobile, and energy sectors. The Company is governed by an eight-member board of directors, chaired by Mr. Aly Khan, including the CEO and two independent directors. Mr. Habibullah Khan assumed the role of Managing Director/CEO on July 01, 2023. The CFO Mr. Waqar Naeem, a Chartered Accountant, leads a team of professionals, ensuring robust financial management and reporting.