PACRA Maintains Entity Ratings of Maple Leaf Cement Factory Limited

The ratings reflect Maple Leaf’s strong business profile supplemented by (i) sizable market share, (ii) recognized brand, and (iii) strong profitability. The company operates at 3.4mln tpa capturing market share of 7.2%. After commencement of announced capacity expansion (2.1mln tpa), market share will remain largely maintained due to aggressive expansion plans of industry players. However, the promising investment in Maple leaf power (40MW coal based power plant) would assist company in reaping cost efficiencies. However, due to low retention prices and fluctuating coal prices the effect is not visible in declining margins. Efficient supply chain management coupled with lower fuel costs assisted sustenance of EBITDA margins historically, however lately surge in international coal price impacted margins. Nevertheless, favorable sector dynamics, on the back of rising local infrastructure activity, has continued to support cement dispatches. Hence, capacity utilization, while showing an increase, has reached optimal level for existing capacity. The entity’s financial risk remains fairly low due to moderately leveraged capital structure and enhanced risk absorption capacity. Going forward, after incorporating planned debt the financial risk remain low on the back of healthy internal cash generation. The ratings recognize the company's seasoned management team, having sound technical stature and quality support infrastructure.

The ratings are dependent on the management's ability to sustain business volumes along with healthy margins. 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.

About the Entity
Maple Leaf Cement Factory Limited – a Kohinoor Maple Leaf Group (KMLG) Company – established in 1956 and is listed on Pakistan Stock exchange. The group, through Kohinoor Textile Mills, owns majority stake (~55%) in the company, while the rest is widely spread among general public and Financial Institutions. KMLG mainly maintains interests in cement and textile sectors. Overall control of the company vests in eight-member board. BoD is dominated by Saigol family, with five members, including the CEO. Mr. Sayeed Saigol, the CEO, is ably spearheading the company. He is supported by a team of professionals with relevant experience in the cement industry.