PACRA Updates Short term Entity Rating of Gharibwal Cement Limited

Gharibwal Cement Limited (“Gharibwal Cement” or “the Company”) ratings upgrade depicts the Company’s sustenance of margins as a result of cost optimization measures and efficient utilization of the plant. The plant has an annual production capacity of 2.1mln tpa. The Company has been conducting its business by selling cement to the localities in close vicinity to the plant located in Ismailwal District Chakwal. The overall performance of the local cement industry has remained under stress throughout FY24, majorly due to the economic challenges faced by the country in the form of high inflation, peaking interest rates, and lower developmental activity. Despite these challenges, the cement industry in Pakistan witnessed marginal growth of ~1.6%, reaching 45.3 million MT during the year ending June 30, 2024, compared to 44.6 million MT last year. Although the local sale volumes declined by 5% (FY24: 38.2 mln MT, FY23: 40.0 mln MT), the overall surge was driven by a significant rise in export dispatches of 56%, reaching 7.1 mln MT, up from 4.6 mln MT last year. A declining trend continued during 1QFY25, with the local dispatches recording a decline of ~20% (1QFY25: 8.1 mln MT, 1QFY24: 10.1 mln MT), while export dispatches grew by ~22% (1QFY25: 2.1 mln MT, 1QFY24: 1.8 mln MT). In line with the industry trend, the Company recorded a decrease of 11.6% in total dispatches for FY24. This decrease has led to a dip of 0.82% in the Net Revenues for FY24, which continued further into 1QFY25 as compared to the same period last year. (FY24: PKR 18,165mln, FY23: PKR 18,316mln, 1QFY25: PKR 4,317mln, 1QFY24: PKR 4,358mln). Gross Profit Margin for 1QFY25 was recorded at 27.2% (1QFY24: 19.9%), up from 20.8% during FY24. The Company has installed a 24 MW solar power plant and implemented a cooler system that reduces coal consumption by 2-3%, enhances heat recovery, and improves clinker quality. Additionally, the Company has chosen to use locally sourced Khushab coal instead of imported coal. These initiatives will further contribute towards improvement in overall operational efficiency. Net Profit Margins followed the same trend during 1QFY25, witnessing an increase of 3% (1QFY25: 12.4%, 1QFY24: 9.4%). The Company has an equity base of PKR 24.587bln whereas its leverage stands at 4.5%. Keeping the current phase of expansion in view, Gharibwal is working on its Line II expansion project to expand its current capacity by 10,000 TPD in order to maintain their market presence in the industry. The financial profile remains adequate as long-term leveraging is expected to increase if expansion is financed with a debt mix.
Going forward, the industry’s demand is expected to remain stressed during the remaining fiscal year 2025. The rating upgrade depicts the management’s commitment towards improvement of the Company’s performance, which is evident from the continuous rising trend in the margins and the sustained market position despite a challenging macroeconomic environment.

About the Entity
Gharibwal Cement Limited, operating with a cement capacity of 2.1mln tpa. The Company is majority-owned by Mr. Tousif Peracha (~56%), founder of Gharibwal Group, followed by Rafique Family (~33%). Gharibwal Group has interests in lubricants and real estate projects locally as well as abroad and shipping and truck manufacturing in Nigeria. The Company has a nine-member BoD, including three independent directors, three non-executive directors, and three executive directors. The CEO, Mr. Tousif Peracha, is supported by a team of experienced individuals with long associations with the Company.