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The Pakistan Credit Rating Agency Limited
Press Release

Date
12-Feb-21

Analyst
Bazah Tul Qamar
bazahtul.qamar@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains Entity Ratings of Kohat Cement Company Limited

Rating Type Entity
Current
(12-Feb-21)
Previous
(13-Feb-20)
Action Maintain Maintain
Long Term A A
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

Kohat Cement’s ratings reflect its good market position in cement industry. The company's market share in north region rose to 9.6% after successful completion of brown-field expansion of 2.3mln tpa, last year. The financing is arranged with debt to equity ratio of 43:57 – majorly equity driven. During July20-Jan21, North based mills dispatched ~24mln tons cement for domestic consumption - ~17% higher as compared to SPLY. Exports from North were ~1.4mln tons showing decline of ~10%. Management is eying to participate in current boom in cement industry by further green field expansion. Industry dynamics especially for cement players operating in north region on account of competitive cement prices, increase in coal prices and depreciation in Pak Rupee against other currencies remain critical. The curtailed key policy rates will be a positive contributor towards the overall sector. Company aims to optimally utilize the recently expanded line IV, in order to cut off direct cost. In FY20 company's bottom line followed a downward trajectory amid COVID-19, on the account of industry shutdown. However in line with the industry trend, company's bottom line reported a profit of ~PKR 507mln in 1QFY21 as demand has picked up the pace. The company has available short term limit of ~PKR 3.3 billion out of which ~72% remained unutilized which shows company’s low reliance on short term borrowings. The company’s fairly low leveraging, healthy liquid investment book provides comfort to the ratings. Company owns an investment property along with a significant amount of liquid assets having a book value of ~PKR 3.7bln and ~PKR 1.6bln which mitigates the financial risk factor to a large extent.
The ratings are dependent on upholding of company’s market position in addition to sustenance of business volumes and margins. The company's strong business performance in current scenario remains vital for ratings. Upholding of governance practices remains important for the ratings.

About the Entity
Kohat Cement, operates as the fourth largest cement manufacturer in the north region with total cement capacity of 5.3mln tons p.a. Kohat Cement, listed on PSX, is majority owned by ANS Capital (Pvt.) Ltd. (55%) – sponsor family’s majority owned company. The overall control of the company vests in eight member board of directors (BoD) including the chairman – Mr. Aizaz Mansoor Shiekh and the Chief Executive Officer, Mr. Nadeem Atta Sheikh.

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.