The Pakistan Credit Rating Agency Limited
21-Jun-17
Analyst
Ayesha Qasim
ayesha.qasim@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
- Rating Modifiers | Outlook and Rating Watch | Jun-16
- Correlation between Long-term and Short-term rating | Jun-16
- Corporate Rating | Jun-16
Related Research
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PACRA Maintains Entity Ratings of Pioneer Cement Limited
| Rating Type | Entity | |
|
Current (21-Jun-17 ) |
Previous (02-Nov-16 ) |
|
| Action | Maintain | Initial |
| Long Term | A | A |
| Short Term | A1 | A1 |
| Outlook | Stable | Stable |
| Rating Watch | - | - |
The ratings reflect Pioneer Cement’s strengthening business profile exhibited from strong EBITDA margins, and steadily improving revenue stream. Pioneer Cement's sales are majorly driven by local market fundamental - a factor of plant location whereby local sales are feasible versus exports. Sales focus on nearby geographies - thereby reducing distribution expense - has benefited the Company's EBITDA. The upcoming projects like grinding mill (120tph) are likely to provide further support to EBITDA. The company has lately commenced (Dec16) Waste Heat Recovery Power Plant (12MW), consequential power savings are expected to assist bottom-line. Moreover, some other projects (i) Capacity expansion (~8000 tpd) (ii) 12MW Waste Heat Recovery Plant (iii) 24MW Coal fired Power Plant are underway. These would raise leveraging; however, it is expected to remain manageable. The ratings draw comfort from (i) positive cement sector fundamentals, and (ii) sponsor's financial strength.<p>The ratings are dependent on the management's ability to (i) uphold margins, and (ii) optimal utilization of existing lines. Any significant deterioration in the sector’s outlook particularly any unfavorable change in demand and expansion matrix, thereby exerting pressure on prices, may negatively impact the ratings. Upholding governance practices remains important.
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.<p>The overall control of the Company vests in eight-member board of directors including the MD/CEO. Four non-executive directors represent Mega group, two are independent members, while remaining two are executive directors. The MD, Syed Mazhar Iqbal, is Chartered Accountant and carries over three decades of diverse experience. He is supported by an experienced management team.