MLN: The Pakistan Credit Rating Agency (PACRA), on Thursday August 9, 2018, assigned an Initial Entity Rating of ‘A’ to Askari Cement Limited, with respect to its Long Term Outlook. A rating of ‘A1’ has been assigned for the Short Term, since the rating agency sees the outlook as ‘stable’.
According to the rating agency, Askari Cement's ratings reflect the strong position in the cement industry from its sustained profile.
The Company has two existing cement-manufacturing units (Nizampur and Wah) – operating with a combined capacity of 2.8 million tpa.
“Over the last few years, the company was able to maintain growth trajectory trend in revenue, supported by strong cement sector fundamentals. The company secures healthy margins – in line with general sector phenomenon. The business profile of the company is likely to stay stable due to strong sector fundamentals, maintained volumes and sustained EBITDA,” says PACRA.
The rating agency also added that the upcoming projects of Askari Cement include BMR at Nizampur plant and WHR at Wah plant. Hence, currently financials are moderately leveraged but the cash flows provide a good coverage to anticipate repayment. “Going forward, leveraging is expected to remain at comfortable level,” the rating agency believes.
The ratings take comfort from strong financial strength of Fauji Foundation – third largest sponsoring group in the cement industry and are dependent on the current positioning of the company’s business besides its financial risk profile making the strengthening of its equity base essential.
“Any significant deterioration in the sector’s outlook particularly any unfavourable change in demand and expansion matrix, thereby exerting pressure on prices and margins, may negatively impact the ratings,” the agency warned.
Askari Cement Limited (ACL) is an unlisted, public limited company incorporated in 1990. The Company is wholly owned subsidiary of Fauji Foundation and is primarily engaged in the manufacturing and sale of Ordinary Portland Cement.
The production facilities are located in North region (Wah and Nizampur). Fauji Foundation has another cement company named ‘Fauji Cement Company Limited. Askari Cement operates with a cement production capacity of ~2.7mln tons p.a. having 5.4% share of the country’s cement capacity of 49.4mln tons per annum.
The collective share of both companies becomes 12.3% which makes Fauji Foundation third largest sponsor group operating in cement industry.
The overall control of the company vests in seven-member board of directors (BoD), including the CEO. The sponsor dominated board is chaired by Chairperson – Lt Gen Syed Tariq Nadeem Gilani, (Retd) , who is also associated with several Fauji Foundation companies board. He holds extensive experience of banking, fertilizer, petroleum, power and various other sectors.
The CEO, Maj Gen Ghulam Mustafa kausar, is a graduate from Command and Staff College Quetta and Armed Forces War College (National Defence University) and is associated with the company as Managing Director / CEO since Aug-16.
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