Bazah Tul Qamar
PACRA Maintains Entity Ratings of Askari Cement Limited
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 had been able to maintain growth trajectory trend in revenue. However due to pandemic corona virus economic activities has slow down thus resulted in the drop of local demand, export is another avenue. Due to excess capacity from recent industry expansion resulted in depressed cement prices (especially in north region). During 9MFY20 the profitability of the company took a significant dip where margins deteriorated attributable to depressed prevailing cement prices along with muted local demand has affected the company's sales volume due to the aforementioned industry dynamics. Overall industry wide local dispatches increased significantly in July-20 as the government has taken steps towards public sector development projects and this will further improved in future as new projects are coming. Long term loan was acquired in previous years for acquisition of Nizampur plant from AWT, BMR at Nizampur Plant and installation of WHR system at Wah Plant. During last quarter of FY-20, the company successfully obtained deferment of principal repayments amounting PKR 2.1bln for one year under SBP Scheme. The financial risk profile is good with moderate leveraging. 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.
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 – Mr. Waqar A Malik who is also associated with several Fauji Foundation companies board. His professional experience spans over 30 years which includes managing and leading businesses in the petrochemicals, consumer and the life sciences industry. The CEO, Mr. Qamar Haris Manzoor has done Masters in Chemical Engineer from US and holds over 33 years of experience in plant and project management. He is assisted by well experienced team members.