Lahore, March 15, 2022 (PPI-OT):Fauji Cement’s ratings hinge on its sustained market presence in the cement sector. The Company captures an adequate market share of 8.07% in North and 6.06% overall. Company is currently operating with two production lines, with an annual capacity of 3.5mln tpa, in Jhang Bahtar, District Attock near Islamabad. The Cement sector’s dispatches have recorded splendid growth and surged by 20% in FY21 as demand in the domestic market accelerated. Also the local industry’s future demand outlook is positive, in view of the infrastructure projects in the pipeline.
Export is another avenue. Industry-wide Export has gone up as a new export window is created in the Bangladesh market. Over the years, company has been able to maintain a growth trajectory. The Company’s revenues witnessed an increase (1QFY22: PKR 6.9bln, FY21: PKR 24.2bln, FY20: PKR 17.2bln) attributed to an uptick in sales volumes, positive price indicators and, reinvigorating economy. The Company managed to recoup previous losses and reported profits of PKR 1.36bln and PKR 3.5bln in 1QFY22 and FY21 respectively.
In order to propel growth in line with cement industry, management has announced further green field expansion of 6,500 TPD, near DG Khan. Estimated cost of project is ~PKR 32.4bln out of which ~63% will be debt financed. Financial Close has already achieved in April-21. The project is expected to be operational by FY 2024. The Company is in the process of merger with Askari Cement, transaction is approved by BoD however the scheme of amalgamation is submitted in High Court, for final approval.
Company keeps a fairly low leveraged financial profile, however adding up of further leveraging due to expansion will potentially impact the financial risk profile of the Company, while expected to remain manageable. Further, the Ratings assigned to Fauji Cement also draw support from the strong financial profile of the Company’s sponsor, Fauji Foundation having a presence across multiple sectors.
The ratings remain dependent on upholding company’s market position along with sustenance of business volumes, margins and achieving optimal utilization of production capacities. Going forward, sustainability in profits for timely repayment of debt remains vital.
For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com