PACRA maintains Entity Ratings of Flying Cement Limited

Flying cement operates with one manufacturing unit, having capacity of 1.2mln tpa, in the North region. In FY22, cement sales witnessed a substantial decline due to uncertainty in government policies and recorded high inputs cost. Cement production declined by 3.6% and overall cement industry utilization stood at 56 per cent in FY22, compared to 72 per cent in the last year. Flying Cement announced cement capacity expansion plan in FY16 which got delayed due to a number of unfavorable economic conditions. As per management, total capacity will be 11,700tpd (Clinker) after line II achieves COD which is expected in the start of FY24. In 1HFY23, Flying Cement recorded profits of PKR 139mln compared to PKR 464mln same period last year. Margins dipped as well due to inflationary pressures especially increase in finance cost. The financial risk matrix remained stressed as in view of current financial crisis in the country, the company’s bank agreed in principle to allow deferment in its principal repayments; the company has however been regularly making payment of its mark-up dues. The equity base has improved in recent periods attributable to equity injection by sponsors through right issue of PKR 5 billion. In cognizance thereof, sponsors have subscribed to substantial amount of 65% of right issue to strengthen the equity base of the Company. Going forward, improvements in margins and cash flows remains vital to the ratings. Rating watch incorporates delays in expansion projects and pressure on financial risk matrix.
The ratings are dependent on improvement of the company’s business and financial risk profile; repayments of deferred long-term loans and strengthening of equity base is vital. Any further derivation from the envisaged financial structure (debt equity ratio, cash coverage etc.) would be considered negative.

About the Entity
Flying Cement Company Ltd, listed on PSX, started commercial production in 2005 and is engaged in the manufacturing and sale of Ordinary Portland Cement. Currently, the company is one of the small players in industry, having 2.3% share in North region’s cement capacity (operational). The majority shares of Flying Cement are owned by sponsors and their family members. The overall structure vests with eight board members including CEO. Three directors are Flying Cement’s executives – Mr. Momin Qamar (Director Finance), Mr. Qasim Khan (Director Sales) and CEO – while five are non-executive directors, including two independent and one female director. Mr. Agha Hamayun Khan, CEO is associated with the company for last 25 years. Mr. Kamran Khan, Chairman of the Group is Science Graduate having 48 years of rich knowledge & experience in handling technical matters for capacity expansion of the company while Mr. Momin Qamar, Graduate in Business with 38 years’ experience is handling financial, banking affairs. Mr. Qasim Khan, Graduate in International Business manages day to day sales/ marketing & procurement affairs of the company while Mr. Yousaf Kamran Khan, Graduate in Business Administration from Regents Business School London is Director Technical & Administration. Mr. Ali Alam Qamar is also looking after the financial affairs of the Company - Graduated from SOAS University of London & done courses from Harvard University & London School of Economics.