Analyst
Usama Zubair
usama.zubair@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
PACRA Maintains Entity Ratings of Pioneer Cement Limited | Outlook is Negative
Rating Type | Entity | |
Current (27-Sep-19 ) |
Previous (29-Mar-19 ) |
|
Action | Maintain | Maintain |
Long Term | A | A |
Short Term | A1 | A1 |
Outlook | Negative | Stable |
Rating Watch | - | - |
The revision in the outlook is attributable to the decline in margins, pressure on profitability and financial risk matrix. Pioneer Cement has been operating a single manufacturing facility. The Company’s sales are majorly driven by local market fundamental – trend followed by all cement players in north region. During FY19, industry dynamics especially for cement players operating in north region have shifted significantly on account of fluctuating cement prices, increase in FED on coal import and depreciation in Pak Rupee against other currencies. Along with these factors, slow local demand has affected the company's sales. The Company is pursuing announced brown-field expansion – clinker 2.4mln tpa – expected to commence in a month or so. Also, 12MW WHRPP and 24MW coal power plant are part of this project - deemed to bring operational efficiencies. The Company's business performance in muted; local demand remains vital with focus on sustaining margins. Optimal capacity utilization and adequate channeling of volumes from upcoming new line are necessary to support financial risk profile. Leveraging has surged on account of debt-driven expansion. The ratings draw comfort from sponsor's financial strength.
The ratings are dependent on the management's ability to (i) improve margins, and (ii) optimal utilization of existing line. Timely repayment of long term financing is essential for the ratings. The company's business performance in current stretched economic scenario - challenges on demand front - remains vital.
About
the Entity
Pioneer Cement is an affiliate of Mega group. The group owns 47% stake in Pioneer Cement through Vision Holding Middle East Limited. The group, led by Mr. Habibullah Khan, has key interest in shipping and logistics business, in addition to exposure in real estate, ports terminal), food and energy sectors. Pioneer Cement is listed on PSX and has a well spread shareholding pattern.
The overall control of the Company vests in ten-member board of directors including the CEO including three independent directors. The lately appointed MD, Mr. Arif Dar, is Chartered Accountant and carries over three decades of diverse experience. He is supported by an experienced management team.