Lahore, May 06, 2022 (PPI-OT):Flying cement operates with one manufacturing unit, having capacity of 1.2mln tpa, in the North region. The Cement sector’s dispatches have recorded splendid growth and surged by 21% in FY21 as demand in the domestic market accelerated. The industry’s future demand outlook is positive, in view of the infrastructure projects in the pipeline. Cement sector announced third phase of expansion (~18 mln tpa) which is expected to increase with more players joining the lane. Flying Cement announced cement capacity expansion plan in FY16 which got delayed due to a number of unfavourable economic conditions.
As per management, after BMR, total capacity will be 11,700tpd (Clinker) which will achieve COD by the end of current year. The Company has successfully started commercial operations of captive power plant of 12 MW at its site in Distt. Khushab in January 2022. This is in addition to completion of WHRPP done last year. The Company is picking up pace. In 1HFY22, Flying Cement recorded profits of PKR 464mln attributable to augmented supply side, better cement prices and less reliance on imported coal. Hence, margins took steep rise.
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 equity injection by sponsors through right issue of PKR 2 billion. In cognizance thereof, sponsors have subscribed to substantial amount of PKR 1.56bln of right shares to strengthen the equity base of the Company. Company is in the process of issuing another right issue of PKR 3 billion to finance its expansion and working capital needs. 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 sustainability of the company’s business and financial risk profile; timely repayments of long-term loans and strengthening of equity base is vital. Any derivation from the envisaged financial structure (debt equity ratio, cash coverage etc.) would be considered negative.
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Analyst,
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