Pakistan Credit Rating Agency Limited upgrades ratings of Cherat Cement

Lahore, November 05, 2015 (PPI-OT):PACRA has upgraded the long term and short-term entity ratings of Cherat Cement Company Limited (Cherat Cement) to ‘A’ (Single A) and ‘A1’ (A one) respectively [previously: ‘A-‘ and ‘A2’]. The ratings denote strong capacity for timely payments of financial commitments.

The ratings reflect Cherat Cement’s ability to capitalize on healthy local cement demand. Operating at optimal capacity utilization level, the company is in process of setting up above 1.3mln tons p.a. of new production line – a brown-field project started last year. This, while more than doubling existing capacity, is likely to add efficiency to overall operations. The progress on the plant is as per schedule. The company deleveraged its balance sheet to create room for this debt driven expansion that would lead to high leveraging, though expected to remain at adequate level.

Comfort is drawn from the debt structure, whereby in addition to grace period, first principal payment falling due two years after planned CoD, interest during construction is an inbuilt component. Furthermore, the company is expected to yield savings in total expansion cost, in turn, debt requirement, due to higher internal generation and favourable interest and forex rates. The ratings draw comfort from positive cement sector fundamentals.

The ratings are dependent on the management’s ability to gain desired efficiencies in margins to match industry trend. Timely execution of the planned expansion while tapping potential demand creating room for capacity utilization of new plant remains important to maintain the ratings at current level.

For more information, contact:
Hammad Rashid
Analyst
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
Email: hammad.rashid@pacra.com
Web: www.pacra.com