The Pakistan Credit Rating Agency Limited
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Anam Waqas Ghayour

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PACRA maintains Entity Ratings of Flying Cement Company Limited

Rating Type Entity
(07-May-21 )
(16-May-20 )
Action Maintain Maintain
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch Yes Yes

Flying cement operates with one manufacturing unit, having capacity of 1.2mln tpa, in the North region. In 1HFY21, the Company picked up pace and recover its losses to report profits that also in line with the cement industry trend. Flying Cement announced cement capacity expansion plan in FY16 but delayed it due to a number of announced capacities and unfavorable economic conditions. Cement sector announced third phase of expansion (~18 mln tpa) which is expected to increase with more players join the lane. Therefore, Flying Cement is also in process to complete its previously announced capacity to almost double its existing capacity of Line-I & brownfield expansion of Line-II (7,700tpd-Clinker). Furthermore, remarkable growth in local demand, curtailed policy rates and better cement prices giving the required supporting environment to flourish. Local capacity utilization already recorded growth to 85% in 1HFY21 (1HFY20: 65%). This depicts the sector’s resilience to the bumpy ride of FY20 and 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. During 1HFY21, Flying Cement recorded profits of PKR 89mln attributable to augmented supply side and better cement prices. Hence, margins took steep rise. The Company had completed WHRPP which is expected to improve margins in FY21 through cost savings however during FY20, company’s bottom line turned red. The financial risk matrix remained manageable as long term finance being acquired in pursuit of expansion; short term finance already reduced. The equity base improved attributable to recent revaluation and equity injection by sponsors through right issue. In cognizance thereof, sponsors have subscribed to substantial amount of PKR 1.56bln of right shares to strengthen the equity base of the Company. Going forward, sustainability in margins and cash flows remains vital to the ratings. Rating watch incorporates delays in expansion projects and pressure on financial risk matrix.
The ratings are dependent on sustained profile of the company’s business and financial risk profile; strengthening of equity base is vital. Any derivation from the envisaged financial structure (debt equity ratio, cash coverage etc) would be considered negative.

About the Entity
Flying Cement Company Limited formerly known as “Zaman Cement Company Limited”, listed on PSX, started commercial production in 2005. The name was changed to “Flying Cement Company Limited” because of brand name “Flying” and its recognition in the market. Flying Cement is engaged in the manufacturing and sale of Ordinary Portland Cement. Currently, the company operates with production capacity of 1.2mln tons p.a; is one of the small players in industry, having 2.3% share in North region’s cement capacity (operational). Flying Cement is majority owned by sponsor family members. The overall structure vests with eight board members including CEO. Three directors are Flying Cement’s executives – CEO, Director Technical & Administration, Director Finance, Director Marketing – while five are non-executive directors, including three independent and one female director. The CEO, Mr. Agha Hamayun Khan, Master’s in Economics, is associated with the group from 24 years. Mr. Kamran Khan, chairman of the group is Graduate in Science, having 37 years of experience and handles Technical matters and capacity expansion of the company. Mr. Momin Qamar, Director Finance, Graduate in Business and having 37 years of experience. Mr. Ali Alam Qamar is also looking after the financial affairs of the Company - Graduated from SOAS University of London & done courses from Harvard University & London School of Economics.

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.