Thatta Cement secures A-/A-2 rating from VIS

With new ratings, Thatta Cement demonstrates robust financial health and sound liquidity

LAHORE: VIS Credit Rating Company Limited on Wednesday granted Thatta Cement Company Limited robust entity ratings of ‘A-/A-2’, reflecting a stable financial outlook and solid business fundamentals.

It is to be noted that medium to long term rating of ‘A-‘ indicates good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. Short-term rating of ‘A-2’ indicates good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good whereas risk factors are small.

Established in 1980 under the aegis of the State Cement Corporation of Pakistan, Thatta Cement has evolved into a key player in the cement industry, characterized by its innovative manufacturing techniques and strategic market presence.

The company’s initial operations began in 1982 with a facility equipped to produce 1,000 tons of clinker per day using dry process technology. This capacity was later doubled to 2,000 tons per day, enhancing the company’s production capabilities and market reach. The significant expansion not only marked Thatta Cement’s commitment to growth but also underscored its ability to scale operations efficiently in a competitive landscape.

In 2004, a pivotal change occurred when the Government of Pakistan divested its stake in Thatta Cement through the Privatization Commission, a move that led to the company’s listing on the Pakistan Stock Exchange in 2008. The subsequent years saw Sky Pak Holding (Pvt) Ltd. and Al-Miftah Holding (Pvt.) Ltd. acquire majority shareholding from Arif Habib Group in 2012, stabilizing the company’s governance and financial outlook.

Thatta Cement’s subsidiary, Thatta Power (Private) Limited, which holds a significant 62.43% ownership, is an integral part of the business, supplying power not only for Thatta’s operations but also to the Hyderabad Electric Supply Company (HESCO), highlighting the vertical integration of the company in energy provision crucial for its manufacturing operations.

The recently assigned ratings by VIS Credit incorporate the medium business risk profile supported by a medium to low level of competition within the cement sector, especially in the southern region of Pakistan. The oligopolistic nature of the market provides a cushion against extreme fluctuations in market dynamics, ensuring stability in operations and financial planning.

Moreover, the ratings reflect the company’s robust financial risk profile buoyed by a notable growth in top-line revenue in FY23 due to an increase in the selling price of cement coupled with a reduction in coal costs, transitioning from imported to local coal sources. These factors have significantly improved the gross and net margins of the company. The coverage profile and capitalization metrics remain comfortably high, supported by a prudent debt management strategy, ensuring less reliance on external financing.

The liquidity position of Thatta Cement is also deemed adequate, with improvements in the company’s financial metrics in the third quarter of FY24 further strengthening its market stance. A significant cash reserve positions the company well to handle future economic uncertainties or potential investment opportunities for further expansion.

Looking ahead, the company’s ratings are poised to remain sensitive to the continuous improvement in financial metrics. With a stable outlook, Thatta Cement is well-positioned to capitalize on market opportunities and navigate challenges, reinforcing its role as a stalwart in Pakistan’s cement industry.


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