VIS Credit Rating Company Limited has reaffirmed the entity ratings of Power Cement Limited at ‘A-/A2’, while maintaining a stable outlook, according to the latest rating action.

The long-term rating of ‘A-’ reflects solid credit quality with adequate protection metrics, whereas the short-term rating of ‘A2’ indicates a strong capacity to meet short-term financial obligations, supported by sound liquidity and cash flow coverage. The previous rating review was conducted on December 23, 2024.

Power Cement, established in 1981 and listed on the Pakistan Stock Exchange since 1987, operates in the manufacturing and sale of various cement products for domestic and export markets.

The cement sector remains cyclical and energy-intensive, facing risks linked to construction demand, fuel prices and exchange rate volatility. However, these pressures are partially mitigated by Power Cement’s established operational base, diversified sales mix, and expanding export footprint.

During the review period, the company recorded improved profitability despite lower revenues, primarily driven by cost optimization, reduced fuel and power expenses and lower finance costs following debt repayments.

Operational efficiency has strengthened further through increased reliance on renewable energy sources, along with planned wind power initiatives aimed at lowering long-term energy costs.

VIS also noted an improvement in capital structure, supported by debt reduction and higher equity levels, which enhanced leverage ratios and debt-servicing capacity. Liquidity indicators strengthened as well, backed by positive operating cash flows and improved coverage of short-term liabilities.

Governance and management practices remain broadly compliant with regulatory standards, with ongoing measures to enhance board independence.

Going forward, VIS stated that the ratings remain sensitive to recovery in the cement sector, construction activity trends, and government policy direction. Key factors to watch include sustained internal capital generation, further liquidity strengthening, and normalization of coverage metrics.