Press Release

VIS Reaffirms Entity Ratings of Lucky Cement Limited

Karachi, June 10, 2022: VIS Credit Rating Company Limited has reaffirmed the entity ratings of ‘AA+/A-1+’ (Double A Plus/A-One Plus) to Lucky Cement Limited (LCL). The medium to long-term rating of ‘AA+’ signifies high credit quality; Protection factors are strong. The short-term rating of ‘A-1+’ signifies high certainty of timely payments; short-term liquidity including internal operating factors and/or access to alternative sources of funds is outstanding and safety is just below risk free Government of Pakistan’s short term obligations. Outlook on the assigned rating is ‘Stable’.

Assigned ratings incorporate LCL’s leadership position in the cement sector, diversified business risk profile, consistently strong operating performance, robust financial profile and sound corporate governance framework. Ratings assigned to LCL also draw support from strong financial profile and diversified presence of the Company’s sponsor, Yunus Brothers Group (YBG) which is a leading conglomerate having presence across multiple sectors including Cement, Power, Real Estate, Textiles, Chemicals, Pharmaceuticals, Healthcare, Food and Automotive Sectors.

Business risk profile incorporates cyclical nature of the cement industry. During FY21, the cement industry offtake recorded sizable uptick of 20.1%, on the back of strong growth of 20.4% in local dispatches. Exports of cement increased by 18.7% from 7.85 MT in FY20 to 9.31 MT in FY21. Nevertheless in 9M’FY22, cement industry sales were down by 5.9% vis-à-vis SPLY. The decline in overall dispatches emanated from a drop in in export volume (35.1 %), which was mainly attributable to supply chain issues and higher freight costs. The short term outlook for the industry is stressed, as the rising cost of cement, being driven by commodity bull cycle in coal and increase in domestic inflation, is likely to weigh on demand and profitability margins of cement companies. Furthermore, elevated political uncertainty and expectation of a relatively lower development budget going forward is also likely to act as a drag on demand. The long term outlook for cement industry remains positive, given Pakistan’s status as a developing nation, low per capita consumption of cement and easy domestic availability of limestone.

Overall business risk profile is supported by core cement operations being complemented by investments in multiple sectors. In FY21, LCL earned other income of Rs. 5.85b, representing about a quarter of the Company’s net revenue (gross margin + other income). VIS expects investments to significantly support earnings over the medium term reflecting a well-diversified business risk profile.

Assessment of financial risk profile incorporates healthy capitalization indicators. Going forward, there are plans to incur capital expenditure, which will be largely debt financed. The additional debt projections have been incorporated in our analysis, wherein we expect FFO to Debt to remain commensurate with the benchmark for the assigned rating. Strong liquidity profile is evident from healthy cash flows, strong coverages and surplus liquidity on balance sheet. The ratings remain dependent on maintaining healthy financial profile and materialization of diversification benefits from investments undertaken.

For further information on this rating announcement, please contact the undersigned (Ext: 207) or Mr. Arsal Ayub, CFA (Ext: 216) at (021)35311861-70. Email for further info 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 .