PACRA Maintains Entity Ratings of Flying Cement Limited

Flying Cement Company Limited ("the Company" or "Flying Cement"), a part of the Flying Group, operates a single manufacturing unit with an annual production capacity of ~1.2 million tons, which is undergoing significant expansion. Strategically located in North Punjab, the facility primarily caters to the northern region of Pakistan. During 1HFY26, the cement industry showed signs of recovery, with total dispatches increasing by ~10% YoY, driven by a 13% rise in domestic demand amid improving macroeconomic stability and private sector construction activity. However, exports declined by ~4% to 4.58 million tons. Sector utilization remained constrained at ~61% due to structural overcapacity.
Amid improving industry dynamics, Flying Cement demonstrated strong performance, achieving volumetric sales of ~1.44 million tons in FY25 with capacity utilization exceeding 100%, supported by Line-I and trial production from Line-II. In 1HFY26, the Company reported revenue of PKR 7.0 billion, reflecting a robust growth of ~78% YoY (1HFY25: PKR 3.9 billion), driven by increased dispatches and a ~6.5% rise in retention prices. The Company’s market share improved to ~3.1%, strengthening its relative positioning within the northern region. Profitability showed recovery compared to 1HFY25, with gross margins improving to 15.7% (1HFY25: 12.8%), supported by better pricing and cost optimization. Operating expenses declined to PKR 102 million (1HFY25: PKR 177 million), further aiding profitability. Consequently, net margins increased to 4.7% (1HFY25: 2.1%). However, higher finance costs, rising to PKR 315 million from PKR 62 million, due to expansion-related borrowings partially offset gains. The Company continues to progress on its key growth initiative, Line-II, which is currently in trial production phase, with Commercial Operations ZZXZ(COD) expected shortly. Upon completion, clinker capacity is expected to increase to ~13,000 TPD (~3.9 million tons per annum), significantly enhancing scale, operational efficiency, and market reach. From a liquidity perspective, working capital management improved. FCFOs strengthened to PKR 825 million (1HFY25: PKR 265 million), reflecting improved operational cash generation. However, despite this level of FCFO, the Company’s coverage remained weak, with FCFO to (Finance Cost + CMLTB + Excess STB) at 0.2x, indicating stress on its debt servicing capacity. Capital structure also improved, with total leveraging declining to 27.6% as of Dec-25 (1HFY25: 32%), supported by an equity base of PKR 12.7 billion. The debt profile remains predominantly long-term, with limited reliance on short-term borrowings, mitigating refinancing risk.
The ratings remain on watch due to delays in the commissioning of Line-II and relatively weak coverage indicators. The timely completion of the expansion is expected to materially enhance the Company’s production scale, while the realization of projected operational efficiencies and improvement in cash flows and margins will be critical going forward. Continued sponsor support and prudent financial management remain essential; however, any further delays or deterioration in financial performance may exert downward pressure on the ratings.

About the Entity
Flying Cement Company Limited, listed on PSX, commenced commercial production in 2005 and is engaged in the manufacturing and sale of Ordinary Portland Cement. The Company holds an approximate ~3.1% market share as of FY25. The majority shareholding (~64.4%) rests with the sponsor family. The Board comprises seven members, chaired by Kamran Khan, and includes a balanced mix of executive, non-executive, independent, and female directors, ensuring compliance with governance standards.