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Cherat Cement: PACRA Maintains Entity Ratings of Cherat Cement Company Limited – Press Release issued by The Pakistan Credit Rating Agency Limited

Following is the text of press release issued by The Pakistan Credit Rating Agency Limited (PACRA)


The Cherat Cement’s installed capacity stands at 4.5mln tons per annum where company currently holds 7% share in the country’s operational cement capacity. During 1HFY20, the Company’s revenues witnessed increase attributable to uptick in cement dispatches (end-Dec19: PKR 9.5bln, end-Dec18: PKR 7.0bln); sales volume increased to 1.78 tons (1HFY19: 1.08 tons). However, margins witnessed significant decline in line with peers. Cement sector achieved second phase of expansion (18 mln tpa).

However, slow local demand and expanded capacity resulted in depressed cement prices (especially in north region). Export is another avenue. Industry wide exports (sizeable increase in South Region) have gone up as new export window is created in Bangladesh market where sector is exporting notable volumes of cement and clinker. Cement sector’s local capacity utilization already recorded dip to 65% in 1HFY20 (FY19: 68%). This will be further impacted amid COVID-19 outbreak and country wide lock down being observed.

The likelihood of impact is considered high where quantum is directly correlated with tenure of lock down. Curtailed key policy rate will provide much needed breathing space to the sector. The company’s efforts of incentivizing dealers in order to enter new markets and developments in achieving cost efficiencies are a positive. The strengthening of business profile by achieving previous higher utilization levels, healthier margins is essential. The Company’s financial profile is moderately leveraged whilst significant dip in profitability and increase in finance cost has led to decline in coverage. Going forward, improvement in profitability for timely repayment of debt remains vital.

The rating are dependent on upholding company’s market position along with sustenance of business volumes and margins. Company’s long term debt repayment is important to improve financial risk matrix. The company’s strong business performance in current stretched economic scenario – challenges on demand front – remains vital for ratings.

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