June 11, 2024 (MLN): Pakistan Credit Rating Agency Limited (PACRA) has maintained entity ratings of Pioneer Cement Limited (PSX: PIOC) at "A" for long term and "A2" for short term with a stable outlook forecast, latest press release issued by PACRA showed.
Pioneer Cement Limited, established in February 1986 and operational since November 1994, is a publicly listed company. It operates three manufacturing lines in the northern region, boasting a total capacity of 5.2m MT.
The Company carries a strong brand name, which is well-received by the market. Pioneer Cement's production volume stood at 1.82m MT during 9MFY24.
There was a dip in the volume compared to previous fiscal year, attributed to market conditions in general and the company’s strategy in particular.
The management’s focus is higher retentions due to shift to premium markets despite volumetric decline hence to improve the profit margins.
Pioneer Cement holds a strong presence in the north region, which provides related advantages.
The company's net revenue for 9MFY24 amounted to PKR 27.3bln, compared to PKR 27.8bln in 9MFY23.
As a corollary of the aforementioned approach, Pioneer Cement observed a positive trend in margins, with gross margins for the period increasing to 32.4%, rising from 25.8% margin recorded last year.
This was on account of various efficiency measures taken by the Company, including shifting of major portion of foreign coal with local one. Now a pre-dominant reliance is being placed on local coal which offers multiple advantages.
The company is also switching its reliance from national grid to captive generations that provides further cost advantages, collectively led to higher profitability.
Further, in anticipation of an increase in craft paper prices, the company has proactively improved its poly to paper mix, which has limited the rise in packing costs.
The company's ratings were reinforced due to its improved cash flow position and capital structure, with leverage improving to 21.3% in 9MFY24 from 30% in FY23 due to early settlements in addition to regular repayments.
Further, the company has also settled its debts with new cheaper loan, consequently reducing finance cost. Net Profit Margins for 9MFY24 stood at 14%, showing improvement from 9.8% recorded same period last year.
As of Mar’24, the total installed capacity of the cement industry in Pakistan stands at 99m MT. In 9MFY24, the industry experienced a modest growth of around 2.7%, with volumes reaching 34.5m MT, up from 33.6m MT in 9MFY23.
However, local dispatches saw a decline of about 3.8%, dropping to 29.4m MT from 30.6m MT in the same period last year on account of depressed economic environment.
On the other hand, export dispatches witnessed a significant increase of around 68% to reach 5.1m MT during 9MFY24, mainly attributed to the favorable profit margins resulting from the depreciation of the local currency and cost competitiveness.
The ratings continue to rely on maintaining the company's market position, sustaining business volumes, margins, and achieving optimal utilization of production capacities.
Pioneer's ability to sustain the competition in the current challenging economic environment, particularly amidst demand uncertainties, remains crucial for its ratings. Going forward, continuation of current performance will contribute positively to the ratings.
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Posted on: 2024-06-11T12:10:04+05:00
