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The Pakistan Credit Rating Agency Limited
Press Release

Date
25-Jun-21

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

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PACRA Maintains Entity Ratings of Pioneer Cement Limited

Rating Type Entity
Current
(25-Jun-21)
Previous
(29-Jun-20)
Action Maintain Downgrade
Long Term A A
Short Term A2 A2
Outlook Negative Negative
Rating Watch - -

Pioneer Cement operates with three manufacturing lines, in north region. In 2HFY21, the Company picked up pace and recover its losses to report profits that also in line with the cement industry trend. With induction of line III having a capacity of 10,000 tpd, the total capacity has enhanced to 17,300 tpd. 12MW WHRPP and 24MW coal power plant as a part of the expansion plan have become operational since Nov2020. Cement sector announced third phase of expansion which is expected to increase with more players joining the lane. Furthermore, remarkable growth in local demand, curtailed policy rates and better cement prices giving the required supporting environment to flourish. Growth in local capacity utilization depicts the sector’s resilience to the impacts amid country wide lock down observed due to COVID-19 outbreak. Though construction sector began operations and high demand from private sector has been seen. Significant increase in sales has been observed along with Company's margins. During 9MFY21 Pioneer Cement recorded Gross profit of PKR 2.6bln against a gross loss of PKR 103mln in FY20. The ratings reflect the squeezed financial profile of the company. This emanates from the high leveraging scale, as a result of the expansion related debt. Coverages have been improved as the FCFO's showed a significant improvement in 3QFY21. Going further as the debt repayment has started, an installment of PKR 1.8bln is due in June21 will further ease out the stressed leveraged structure the The Company's business performance with local demand remains vital with focus on sustaining margins. Optimal capacity utilization and adequate channeling of volumes from new line are necessary to support financial risk profile.
The ratings captures the strains in the financial profile. It is important to (i) improve equity base in line with the enhanced leveraging, ii) cash flows generation iii) margins, and (ii) optimal utilization of existing and new lines. Timely repayment of mark up and principal is essential for the ratings.

About the Entity
Pioneer Cement is an affiliate of Mega group. The group owns 47% stake in Pioneer Cement through Vision Holding Middle East Limited. The group, led by Mr. Habibullah Khan, has key interest in shipping and logistics business, in addition to exposure in real estate, ports terminal), food and energy sectors. Pioneer Cement is listed on PSX and has a well spread shareholding pattern. The overall control of the Company vests in eight-member board of directors including the CEO including three independent directors. Syed Mazher Iqbal has appointed as Chief Executive Officer of the Company by the Board of Director in place of Mr. Sajid Feroze w.e.f June 01, 2021.

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.