Press Release

VIS Reaffirms Entity Ratings of Power Cement Limited

Karachi, December 30, 2022: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of Power Cement Limited (PCL) at ‘A-/A-2’ (Single A Minus/A-Two). Long-term rating of ‘A-’ reflects good credit quality; protection factors are adequate and risk factors may vary with possible changes in the economy. Short-term rating of ‘A-2’ signifies good certainty of timely payment. Liquidity factors and company fundamentals are sound; good access to capital markets and risk factors are small. Outlook on the assigned ratings is 'Stable'. Previous rating action was announced on November 30, 2021.

Ratings continue to reflect strong sponsor strength (Arif Habib Group - leading industrial and financial conglomerate in Pakistan) and demonstrated support in form of equity injection through issuance of preference share and capital contribution over the review period. Additional comfort is drawn from debt payment shortfall support to local lenders for first four years post commercial operations of Line III expansion project (now two years remaining) and entire tenor for foreign investors. Ratings constraints include negative net margins and pressure on debt servicing through operational cash flows.

With regards to cost-efficiencies initiatives, the Company recently installed waste heat recovery system and solar power plant while wind power project is currently in the preliminary evaluation phase. In addition, coal consumption has also noted a shift towards local procurement. Revenue growth is driven by price increase while volumetric offtake noted a declining trend; market share remained stable since last review. Sizeable jump in input costs combined with significant financial charges on debts translated into net losses. Thus, cash flow coverage remains constrained, with funds from operations reported consistently negative past four fiscal years. However, leverage metrics have improved considerably as a result of sizeable sponsor contribution of Rs. 7b.

Short-term outlook for the industry is stressed, as rising cement costs driven by commodity super cycle in coal, with limited capacity to pass on prices to consumers and increase in domestic inflation, is likely to weigh on demand and profitability margins. Furthermore, elevated economic uncertainty and expectation of a relatively lower construction and infrastructure activity going forward is also likely to act as a drag on demand. Over the rating horizon, the company's sensitivity to weakening macroeconomic indicators and resultant impact on sector dynamics is high. Ratings remain dependent upon sponsor support to meet any shortfall in debt servicing going forward and achievement of projected profitability.

For further information on this rating announcement, please contact Mr. Muhammad Tabish (Ext: 206) or the undersigned (Ext. 207) at 021-35311861-70 or email at

Sara Ahmed

Applicable Rating Criteria: Industrial Corporates (August 2021)

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2022 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

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