Lahore, 11 Oct 2023:PACRA (Pakistan Credit Rating Agency) has opted to maintain the entity ratings of Matracon Pakistan (Private) Limited, a prominent figure in the construction industry since 1996, amidst alterations in its focus and financial status. Notably, while Matracon has undertaken numerous public and private projects since its inception, often collaborating with international JV partners from established institutions, including those in China, the company has shifted its primary focus from road construction and drainage systems to building design. Despite posting a topline of PKR 5.67bln in 1HFY23, marginally higher than PKR 5.56bln in 1HFY22, and an improvement in margins from 10% to 19%, challenges in the form of a slowdown in project progress and recoveries due to increased raw material prices and policy rates have been observed.

While Matracon has traditionally undertaken large infrastructure projects, the company's recent pivot to building design is reflected in the 1HFY23 financials. The increase in margins during this period is attributed to the revenue realization from projects completed in FY22. Concurrently, the company has navigated financial challenges stemming from a slowdown, impacted by rising raw material prices and elevated policy rates. In response, Matracon has sought cost escalation for existing projects, with negotiations reportedly ongoing. Additionally, for the benefit of the ratings, the incorporation of new projects into the current project bank has been deemed imperative.

The maintenance of the entity ratings by PACRA underpins the long-term sustainability of the business and its financial structure, wherein Matracon has reliably sustained a steady revenue stream and ensured the timely completion of projects without noteworthy cost and time overruns. During the review period, while operational projects guaranteed a revenue stream for the upcoming financial year, a dried-up pipeline of projects was noted by the rating watch. To ameliorate the ratings, fortifying the project pipeline and collection efficiency is cited as crucial. Any protracted downturn in subdued business volume could adversely impact the ratings, underscoring the necessity of governance and control environment improvements.

Matracon, having been operative in the industry since 1996 and recognized for delivering both public and private projects, continues to navigate through its financial and operational adjustments with an eye towards maintaining its status in the construction industry, while simultaneously managing the implications of these alterations on its financial standing and credit ratings.