Analyst
Sehar Fatima
sehar.fatima@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
PACRA Maintains Entity Ratings of Fecto Cement Limited
Rating Type | Entity | |
Current (27-Sep-19 ) |
Previous (30-Mar-19 ) |
|
Action | Maintain | Maintain |
Long Term | A- | A- |
Short Term | A2 | A2 |
Outlook | Stable | Stable |
Rating Watch | - | - |
Fecto Cement has a single manufacturing capacity, located in north region, with an annual cement capacity of 0.8mln tons. The Company’s sales are majorly driven by local market fundamental – an industry wide phenomenon. However, Fecto exported a minuscule part to India and Afghanistan - viable export markets given geographical location of the company. During FY19, industry dynamics especially for cement players operating in north region have shifted significantly on account of fluctuating cement prices, increase in FED on coal import and depreciation in Pak Rupee against other currencies. Along with these factors, muted local demand has affected the company's sales whereby volumetric sales went down. The aforementioned factors have affected the company’s sales and corresponding costs; which resulted in deterioration of margins of Fecto. The company has announced green-field expansion, since some time, modalities are yet to be finalized. It has taken time for the project to start. With the new market conditions and the delay in the finalization of the project financing and other related matters, it is unlikely that the project will start over the short horizon. Currently, the company is operating on deleveraged structure. Given current business profile, any acquisition of long term finance will be a rating negative factor.
The ratings are dependent on improvement of company’s business volumes and margins. The company's improved business performance in current stretched economic scenario – challenges on demand front - remains vital for ratings.
About
the Entity
Fecto Cement, operates with 2.0% market share in the existing cement capacity of the country. The company is public limited company incorporated in 1981 and is engaged in manufacturing, marketing and selling of cement and clinker. Mr. Yasin Fecto, identified as the man at the last mile, owns controlling stake in the company. The overall control of the company vests in seven member board of directors (BoD), including the CEO. The BoD comprises three independent directors, whereas Mr. Rohail Ajmal is the representative of Saudi Pak on board. Mr. Yasin Fecto, the CEO, is assisted by experienced management team.