The Pakistan Credit Rating Agency Limited
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Ayesha Qasim

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PACRA Maintains Entity Ratings of Askari Cement Limited

Rating Type Entity
(16-Nov-18 )
(09-Aug-18 )
Action Maintain Initial
Long Term A A
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

Askari Cement's ratings reflect its sustained position in the cement industry. The Company has two existing cement manufacturing units (Nizampur and Wah) - operating with combined capacity of 2.8mln tpa. Over the last few years, the company was able to maintain growth trajectory trend in revenue, supported by strong cement sector fundamentals. The company’s margins witnessed decline, in recent year, on account of surge in coal prices and dip in cement prices. It is vital for management to uphold business profile of the company by sustaining margins and improving volumes. The upcoming projects include BMR at Nizampur plant and WHR at Wah plant. Hence, currently financials are moderately leveraged. However, cashflows provide good coverage to anticipate repayment. Going forward, leveraging is expected to remain at comfortable level. The ratings take comfort from strong financial strength of Fauji Foundation - third largest sponsoring group in the cement industry.
The ratings are dependent on current positioning of the company’s business besides financial risk profile; strengthening of equity base is essential. Any significant deterioration in the sector’s outlook particularly any slowdown in economic growth, interest rate fluctuation and delay in infrastructure projects may affect the ratings. Industry’s dynamics encompassing expected challenges of supply glut, substantial decline in local demand or deterioration in cement prices will negatively affect the ratings.

About the Entity
Askari Cement Limited (ACL) is an unlisted, public limited company incorporated in 1990. The Company is wholly owned subsidiary of Fauji Foundation and the production facilities are located in North region (Wah and Nizampur). Fauji Foundation has another cement company named ‘Fauji Cement Company Limited. Askari Cement operates with a cement production capacity of ~2.7mln tons p.a. having 4.9% share of the country’s cement capacity of 54.2mln tons per annum. The collective share of both companies becomes 11.3% which makes Fauji Foundation fourth largest sponsor group operating in cement industry.

The overall control of the company vests in seven-member board of directors (BoD), including the CEO. The sponsor dominated board is chaired by Chairperson – Lt Gen Syed Tariq Nadeem Gilani, (Retd), who is also associated with several Fauji Foundation companies board. He holds extensive experience of banking, fertilizer, petroleum, power and various other sectors. The CEO, Maj Gen Ghulam Mustafa kausar, is a graduate from Command and Staff College Quetta and Armed Forces War College (National Defence University) and is associated with the company as Managing Director / CEO since Aug-16. He is assisted by well experienced team members.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.