Pakistan Credit Rating Agency Limited assigns Entity Ratings to Cherat Cement Company Limited

Lahore, February 25, 2015 (PPI-OT): PACRA has assigned a long-term entity rating of ‘A-‘ (Single A Minus) and short-term rating of ‘A2′ (A Two) to Cherat Cement. These ratings denote a low expectation of credit risk emanating from strong capacity for timely payment of financial commitments.

The ratings reflect Cherat Cement’s adequate business profile – likely to be strengthened through planned expansion – and conservatively designed financial profile. The company has ventured into brown-field project to add above 1.3mln tons p.a of new production line. This, while more than doubling
existing capacity, is likely to add efficiency to overall operations. In pursuant of expansion, Cherat Cement has to create room for debt driven capacity addition.

Although this would raise the leveraging; given currently deleveraged balance sheet, it is expected to remain at adequate level. Comfort is drawn from the debt structure, whereby in addition to grace period, first principal payment would fall due two years after planned CoD; interest during construction is an inbuilt component. Meanwhile, available free cash flows would be retained. This would provide cushion to financial risk profile. The ratings draw comfort from positive cement sector fundamentals.

The ratings are dependent on the management’s ability to improve business and EBITDA margins to become at par with industry. Timely execution of the planned expansion while tapping potential demand creating room for capacity utilization of new plant is considered critical to maintain the ratings at current level.

For more information, contact:
Hammad Rashid
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425

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