PACRA Maintains the Entity Ratings of Fecto Cement Limited

Fecto Cement Limited (FCL) has been operating in the local cement industry for over three decades, ensuring the sponsors commitment towards the Company’s sustainability. With its single manufacturing facility, the Company is categorized amongst the small players occupying ~1% market share in terms of its dispatches. Over the previous fiscal year, the local cement industry witnessed a decline of ~15.7% in cumulative dispatches resulting from the economic constraints which hindered developmental activity. Furthermore, the soaring inflation in the country adversely impacted the demand. Similarly, the Company’s total dispatches declined by ~9.92% (FY23: 0.642mln MT, FY22: 0.713mln MT). Both local and export sale volumes of the Company registered a decline during the period. Despite the decline in volumes, the Company recorded Net Revenues of PKR 8,682mln, registering a growth of ~28% stemming from higher pricing. However, the Gross Profit Margins declined to 4% reflecting increase in the cost of goods manufactured that was not entirely passed on to the customer. The capacity utilization of the plant stood at around ~68% during FY23 to meet the demand. The transition into 1HFY24 proved to be fruitful for the Company as it reported superior growth of 23% in dispatches as compared to the industry’s growth of 10%. Subsequently, the reported Net Revenues also grew by 38% as compared to the same period previous year. Moreover, during the 1HFY24, the management was able to cut down cost through efficient capacity utilization along with suitable coal mix. As a result, Gross Profit Margins improved to 13%. The Company maintains a moderately leveraged structure to support its working capital needs. The Company has an adequate cash flow position to meet its interest cost. With slight growth expected during FY24, the management is focused towards optimum capacity utilization to boost the profitability. The Company’s mining license was revoked back in 2015 that allowed FCL to carry out crushing activities in the area to source limestone. To cater this risk, the Company obtains the required raw material from local vendors.
The ratings are dependent on the sustainability of the margins along with holding the market share in the local cement industry. Furthermore, positive cashflows to meet finance cost remains vital for the Company.

About the Entity
Fecto Cement Limited is a public limited company incorporated on February 28th, 1981. It is engaged in the production and sale of ordinary Portland cement. The Company’s manufacturing facility is situated at Sangjani village, Islamabad with an annual installed production capacity of 1.0mln MT of cement. The CEO, Mr. Yasin Fecto has been associated with the Company for more than 30 years and holds 75% stake. The BoD comprises of three independent directors and three non-executive directors. The CEO is accompanied by a team of experienced individuals having long association with the Company.