The Pakistan Credit Rating Agency Limited
Press Release


Ali Arslan Malik

Applicable Criteria

Related Research

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 the Entity Ratings of Pioneer Cement Limited

Rating Type Entity
(07-Jun-24 )
(07-Jun-23 )
Action Maintain Maintain
Long Term A A
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

Pioneer Cement Limited, established in February 1986 and operational since November 1994, is a publicly listed company. It operates three manufacturing lines in the northern region, boasting a total capacity of 5.2mln MT. The Company carries a strong brand name, which is well received by the market. Pioneer Cement's production volume stood at 1.82mln MT during 9MFY24. There was a dip in the volume compared to previous fiscal year, attributed to market conditions in general and the Company’s strategy in particular. The management’s focus is higher retentions due to shift to premium markets despite volumetric decline hence to improve the profit margins. Pioneer Cement holds a strong presence in the north region, which provides related advantages. The Company's net revenue for 9MFY24 amounted to PKR 27.3bln, compared to PKR 27.8bln in 9MFY23. As a corollary of the aforementioned approach, Pioneer Cement observed a positive trend in margins, with gross margins for the period increasing to 32.4%, rising from 25.8% margin recorded last year. This was on account of various efficiency measures taken by the Company, including shifting of major portion of foreign coal with local one. Now a pre-dominant reliance is being placed on local coal which offers multiple advantages. The Company is also switching its reliance from national grid to captive generations that provides further cost advantages, collectively led to higher profitability. Further, in anticipation of increase in craft paper prices, the Company has proactively improved its poly to paper mix, which has limited the rise in packing costs. The Company's ratings were reinforced due to its improved cash flow position and capital structure, with leverage improving to 21.3% in 9MFY24 from 30% in FY23 due to early settlements in addition to regular repayments. Further, the Company has also settled its debts with new cheaper loan, consequently reducing finance cost. Net Profit Margins for 9MFY24 stood at 14%, showing improvement from 9.8% recorded same period last year. As of Mar’24, the total installed capacity of the cement industry in Pakistan stands at ~99mln MT. In 9MFY24, the industry experienced a modest growth of around 2.7%, with volumes reaching 34.5mln MT, up from 33.6mln MT in 9MFY23. However, local dispatches saw a decline of about 3.8%, dropping to 29.4mln MT from 30.6mln MT in the same period last year on account of depressed economic environment. On the other hand, export dispatches witnessed a significant increase of around 68% to reach 5.1mln MT during 9MFY24, mainly attributed to the favorable profit margins resulting from the depreciation of the local currency and cost competitiveness.
The ratings continue to rely on maintaining the Company's market position, sustaining business volumes, margins, and achieving optimal utilization of production capacities. Pioneer's ability to sustain the competition in the current challenging economic environment, particularly amidst demand uncertainties, remains crucial for its ratings. Going forward, continuation of current performance will contribute positively to the ratings.

About the Entity
Pioneer Cement, affiliated with the Mega Group, has 47% ownership held by Vision Holding Middle East Limited, led by Mr. M Habibullah Khan, the chairman of the Group. The Mega Group, under Mr. M Habibullah Khan's leadership has diverse interests spanning shipping, logistics, real estate, ports terminals, food, and energy sectors. The Company is governed by an eight-member board of directors, chaired by Mr. Aly Khan, including the CEO and three independent directors. Mr. M Habibullah Khan assumed the role of Managing Director/CEO on July 01, 2023. The CFO, Mr. Waqar Naeem, a Chartered Accountant, leads a team of professionals, ensuring robust financial management and reporting.

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.