PACRA Maintains Entity Ratings of Maple Leaf Cement Factory Limited

Lahore, June 22, 2018 (PPI-OT): The ratings reflect Maple Leaf’s strong business profile supplemented by (i) sizable market share, (ii) recognized brand, and (iii) strong profitability. The company operates at 3.4mln tpa capturing market share of 7.2%. After commencement of announced capacity expansion (2.1mln tpa), market share will remain largely maintained due to aggressive expansion plans of industry players. However, the promising investment in Maple leaf power (40MW coal based power plant) would assist company in reaping cost efficiencies.

However, due to low retention prices and fluctuating coal prices the effect is not visible in declining margins. Efficient supply chain management coupled with lower fuel costs assisted sustenance of EBITDA margins historically, however lately surge in international coal price impacted margins. Nevertheless, favourable sector dynamics, on the back of rising local infrastructure activity, has continued to support cement dispatches.

Hence, capacity utilization, while showing an increase, has reached optimal level for existing capacity. The entity’s financial risk remains fairly low due to moderately leveraged capital structure and enhanced risk absorption capacity. Going forward, after incorporating planned debt the financial risk remain low on the back of healthy internal cash generation. The ratings recognize the company’s seasoned management team, having sound technical stature and quality support infrastructure.

The ratings are dependent on the management’s ability to sustain business volumes along with healthy margins. Any significant deterioration in the sector’s outlook particularly any unfavourable change in demand and expansion matrix, thereby exerting pressure on prices, may negatively impact the ratings.

For more information, contact:
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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