Maple Leaf Cement ratings reaffirmed by VIS

October 15, 2024 (MLN): The VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Maple Leaf Cement Factory Limited (PSX: MLCF) at ‘A’ for long-term and ‘A-1’ for short term with a stable future outlook, latest press release issued by VIS showed.

MLCF, a public limited company listed on the Pakistan Stock Exchange, is primarily involved in the production and sale of cement.

The Company is a subsidiary of Kohinoor Textile Mills Limited (KTML) and has its registered office situated at 42-Lawrence Road, Lahore, Pakistan.

The cement factory is located at Iskanderabad District Mianwali in the province of Punjab.

MLCF has a wholly owned subsidiary, MLPL, engaged in generating, purchasing, transforming, distributing, and supplying electric power to MLCF.

The Kohinoor Maple Leaf Group (KMLG) has presence in textile, cement, power generation and investment management.

KTML’s subsidiaries include MLCF, Maple Leaf Power Limited (MLPL), Maple Leaf Capital Limited (MLCL) and Novacare Hospitals (Pvt) Limited (NHPL).

Assigned ratings take into account the business risk profile of Pakistan's cement sector, which operates within a moderate competition environment and is supported by a stable regulatory framework.

However, the sector faces risks due to high cyclicality linked to construction sector fluctuations, capital intensity, and energy price escalation.

The market structure is oligopolistic, with the sector's performance heavily influenced by domestic demand, which remains subdued.

Exposure to external factors, including exchange rate fluctuations and coal price volatility, adds further pressure.

Assigned ratings also consider the company's financial risk profile.

Profitability benefitted from higher selling prices and cost control measures, particularly in energy management.

Liquidity remained strong, with improvements in cash flow generation reducing dependence on bank financing in meeting working capital needs.

The company's capitalization profile is conservative, with a reduction in gearing and leverage ratios due to profit retention and timely debt repayment. Coverage ratios, though declining, remain aligned with rating levels.

Going forward, the assigned ratings will be sensitive to the company's ability to manage risks related to demand recovery, energy price volatility, and financial leverage. Maintaining the coverage metrics is important for the assigned ratings.

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