The Pakistan Credit Rating Agency Limited
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PACRA Maintains Entity Ratings of Askari Cement Limited

Rating Type Entity
Action Maintain Maintain
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 2.7mln tpa. Over the last few years, the company has been able to maintain growth trajectory trend in revenue. During FY19, industry dynamics especially for cement players operating in north region have shifted significantly on account of diluted cement prices, increase in FED on coal import and depreciation in Pak Rupee against other currencies. However, the company’s margins witnessed improvement attributable to usage of local coal and recent completion of BMR which led to operational efficiencies. Hence, the business profile is expected to behave strongly in the medium term. The financial risk profile is good with moderate leveraging and strong absolute EBITDA. 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 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 5.9% share in north region's operational cement capacity.

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.