Press Release

VIS Assigns Positive Outlook to Maple Leaf Cement Factory Limited

Karachi, May 28, 2021: VIS Credit Rating Company Limited has reaffirmed the entity ratings of Maple Leaf Cement Factory Limited (MLCF) at ‘A/A-1’ (Single A Plus/A-One Plus). Long-term rating of ‘A’ denotes good credit quality, with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. The short-term rating of ‘A-1’ denotes high certainty of timely payment, liquidity factors are excellent and supported by good fundamental protection factors. Outlook on the assigned rating has been revised from ‘Stable’ to ‘Positive’.

The revision in outlook takes into account improvement in cement sector margins, on the back of a positive demand outlook. During 9M’FY20, cement industry offtake was up 17% YoY vis-à-vis SPLY. Higher offtake, increase in pricing and Government’s decision to reduce Federal Excise Duty (FED) on sale of cement, have supported the profitability margin of industry participants. Akin to the industry, MLCF achieved notable improvement in gross margin, which had slipped into the negative territory during FY20. In line with improvement in profitability indicators, cash flow coverage indicators have posted improvement, while gearing also stood on the lower side as of Mar’21.

Going forward, MLCF has plans in place to increase plant capacity by 2.2m MTs, major part of which will be funded through debt. As a result, gearing is expected to increase during the rating horizon, albeit should remain adequate. Similarly, cash flow coverage is likely to slide, although remaining adequate. As per management, the addition of Line 4 will further add to plant efficiency, thus allowing MLCF to become a leading cement produced in terms of plant efficiency.

The assigned ratings incorporate the cyclical business risk profile of cement industry and the Company’s market position as the fourth largest cement producer in the country. Ratings also reflect the company’s satisfactory and efficient operations with MLCF being one of the low cost producers in the cement sector. The Company has a diversified portfolio which includes Ordinary Portland Cement, Sulphate Resistant Cement, Low Alkali Cement, White Cement and Wall Coat. The assigned ratings remain dependent on maintenance of profitability margins, cash flow coverages and capitalization metrics.

For further information on this rating announcement, please contact Mr. Arsal Ayub (Ext: 216) or the undersigned (Ext. 201) at 021-35311861-70 or email at info@vis.com.pk .



Javed Callea
Advisor

Applicable Rating Criteria: Industrial Corporates - April 2019
https://s3-us-west-2.amazonaws.com/backupsqlvis/docs/Corporate-Methodology-201904.pdf

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