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The Pakistan Credit Rating Agency Limited

Date
28-Dec-2017
Analysts
Jhangeer Hanif
jhangeer@pacra.com

Sehar Fatima
sehar.fatima@pacra.com

+92-42-35869504
www.pacra.com
Applicable Criteria

  • Corporate Rating Methodology (Jul 17) [View]
  • Correlation between long-term and short-term rating scale (Jun 17) [View]

Related Research

  • Sector Study | Cement (Sep 16) [View]
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PACRA Maintains Entity Ratings of Pioneer Cement Limited
 Rating Type Entity
Current
(28-Dec-2017)
Previous
(21-Jun-2017)
 Action Maintain Maintain
 Long Term A A
 Short Term A1 A1
 Outlook Stable Stable
 Rating Watch - -

The ratings reflect Pioneer Cement’s healthy business profile supplemented by strong EBITDA margins and improved revenue stream. Pioneer Cement's sales are majorly driven by local market fundamental - a factor of plant location whereby local sales are feasible versus exports. The factors like i) sales focus on nearby geographies - thereby reducing distribution expense and ii) achieving higher capacity utilization level has benefited the Company's EBITDA. The upcoming energy projects (12MW WHRPP and 24MW coal power plant) are likely to assist bottom-line in future through significant power cost savings. The financial risk profile of the company is strong on account of low leveraged capital structure along with healthy coverages and is expected to remain low in medium term. The ratings draw comfort from sponsor's financial strength.

The ratings are dependent on the management's ability to (i) uphold margins, and (ii) optimal utilization of existing lines. Any significant deterioration in the sector’s outlook particularly any unfavorable change in demand and expansion matrix, thereby exerting pressure on prices and margins, may negatively impact the ratings.

About the Entity
Pioneer Cement is an affiliate of Mega group. The group owns 47% stake in Pioneer Cement through Vision Holding Middle East Limited. The group, led by Mr. Habibullah Khan, has key interest in shipping and logistics business, in addition to exposure in real estate, ports (terminal), food and energy sectors. Pioneer Cement is listed on PSX and has a well spread shareholding pattern. The overall control of the Company vests in eight-member board of directors including the MD/CEO. Four non-executive directors represent Mega group, two are independent members, while remaining two are executive directors. The MD, Syed Mazhar Iqbal, is Chartered Accountant and carries over three decades of diverse experience. He is supported by an experienced management team.
The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.
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