Cherat Cement Company Limited ("Cherat Cement" or "the Company") is a public limited company, established in 1981, and began its operations in 1985. The Company is listed on the Pakistan Stock Exchange (PSX). The geographical location and addresses of the Company’s business units are as: Head Office located at Modern Motors House, Beaumont Road, Karachi and the Plant is located at Village Lakrai, P.O Box 28, District Nowshera.

In 1964, Mr. Ghulam Faruque (late) established Faruque (Pvt.) Ltd., which acts as the Group’s holding company. Mr. Ghulam Faruque had five sons who gradually expanded the businesses after the death of their father. Presently, the third generation is heading the business ventures and holds relatively equal financial stake in Faruque (Pvt.) Limited. Over the years, Ghulam Faruque Group (GFG) has strengthened its foothold in various business ventures. Currently, the Group has interests in the fields of cement, sugar, packaging, software solution, air conditioning, CNG installation, sales and servicing of engineering parts.

Cherat Cement is engaged in the manufacturing, marketing and sale of Ordinary Portland Cement. With an installed capacity of 4.5 million tons per annum, the Company currently holds ~7% market share. By virtue of being located in the North (District: Nowshera), the Company caters the need of Punjab, Khyber Pakhtunkhwa (KPK), Federally Administered Tribal Area (FATA) and Azad Jammu Kashmir (AJK) in local market and Afghanistan in the export market. ‘Cherat’ – the brand – is sold at a premium in the market.

Ghulam Faruque Group (GFG) holds a majority stake of 56% in Cherat Cement, which is owned through associated companies and family members. The remaining 24% of the shares are held by financial institutions and mutual funds, while the remaining 20% is owned by the general public. Founded in 1964, GFG serves as the parent company of the Group and primarily functions as its investment arm. Over the years, GFG has played a key role in shaping the strategic direction of its subsidiaries and maintaining its diversified portfolio of investments across various sectors.

Currently, the third generation is leading the operations of Ghulam Faruque Group (GFG) and its associated companies. As a result, the ownership structure is expected to remain stable and unchanged in the foreseeable future, with the family continuing to play a central role in the Group's leadership and strategic direction.

The sponsors of the company demonstrate strong business acumen, with the sponsoring family having diversified interests across various sectors. Over the years, the group (GFG) has solidified its presence in multiple business ventures. Mirpurkhas Sugar Mills Limited, established in 1964, is a key player in the manufacturing and sale of sugar and corrugated paper. Located approximately 230 km from Karachi in Mirpurkhas, the company is listed on the Pakistan Stock Exchange. With a crushing capacity of 12,500 tons per day, it ranks as one of the most efficient sugar mills in Pakistan. In addition to sugar production, the company is engaged in the development of higher-yield sugarcane varieties on its experimental farm. To further diversify and strengthen its business, the company has also launched a Paper and Board Project with a capacity of 250 tons per day (TPD), successfully commencing commercial production in May 2023. This expansion will enhance the company’s prospects and enable it to capitalize on synergies, driving revenue growth beyond its sugar operations. Cherat Packaging Limited, established in 1991, is a leading manufacturer of Kraft paper, polypropylene bags, and flexible packaging products. It is the largest producer and supplier of paper sacks and polypropylene (PP) bags to the cement industry in Pakistan. Additionally, the Group has investments in software solutions, air conditioning, CNG installation, and the sales and servicing of engineering parts.

The financial strength of the group is considered robust, primarily due to its association with GFG. In FY24, the group reported significant financial performance, with total revenue exceeding PKR 90 billion and total assets amounting to approximately PKR 80 billion. This solid financial foundation underscores the group’s strong market position and capacity for sustained growth.

The overall control of the Company vests in eight-member board of directors (BoD), including the CEO. The BoD comprises three non-executive directors, including three independent directors. Out of which three are Ghulam Faruque family members, including the CEO.

Mr. Omar Faruque serves as the Chairman of the Board and is a representative of GFG. He holds a B.A. in Finance from Polytechnic London and has been a member of the board since January 2014. In addition to his role at Cherat Cement, Mr. Faruque is the CEO of Zensoft (Pvt.) Limited and a director at Greaves CNG (Pvt.) Limited, both of which are associated companies of Cherat Cement. The Company benefits from a balanced and professional board composed of highly qualified members with diverse business expertise. The strong business acumen and technical expertise of the board members contribute significantly to the Company's high standards of governance and strategic direction.

The minutes of the board meetings demonstrate high attendance by directors, active participation, and constructive challenges to management decisions in a productive manner. The board is supported by two key committees—Audit and Human Resource & Remuneration—which assist in addressing relevant matters and ensuring effective governance across the organization. These committees play an integral role in providing specialized oversight and guidance on their respective areas, thereby enhancing the overall decision-making process of the board.

M/s EY Ford Rhodes Chartered Accountants, a member of the 'A category' panel of the State Bank of Pakistan (SBP), was serves as the external auditor for Cherat Cement. The firm has issued an unqualified opinion on the Company's financial statements for FY24, confirming that the financial statements present a true and fair view of the Company's financial position and performance. For FY25, M/s Grant Thornton Anjum Rahman Chartered Accountants, also a member of the 'A category' panel of the SBP, has been appointed as the external auditors of the Cherat Cement.

Cherat Cement operates with a well-structured organizational hierarchy, with its operations divided into eight key functions: 1) Procurement, 2) Production, 3) Sales & Marketing, 4) Information Technology, 5) Finance, 6) Legal & Corporate Affairs, 7) Human Resources, and 8) Internal Audit. Each department is led by an Executive Director or General Manager (GM), who reports directly to the CEO, ensuring efficient management and coordination across the Company.

Mr. Azam Faruque is the Chief Executive Officer (CEO) of Cherat Cement He is an Electrical Engineering and Computer Science graduate from Princeton University, USA. He completed his MBA with high honors from the University of Chicago, Booth School of Business. Apart from the time he has spent in the cement industry, he has also served as a member on the Boards of State Bank of Pakistan, National Bank of Pakistan, and Oil and Gas Development Corporation Limited. He was a Member of the Board of Governors of GIK Institute, Member of the National Commission of Science & Technology and also a Member of the National Committee of the Aga Khan Foundation. Mr. Azam Faruque has served on the Board of the Privatization Commission of the Government of Pakistan, Madian Hydro Power Limited, Atlas Asset Management Limited, International Industries Limited, Atlas Battery Limited and was the Chairman KPK Oil & Gas Development Company Limited. Mr. Yasir Masood, a Fellow Chartered Accountant (FCA), Certified Internal Auditor (CIA), and Certified Information Systems Auditor (CISA), serves as the Chief Operating Officer (COO) and has been with the Company since 2002. Mr. Ijaz Ahmed, a Fellow Cost and Management Accountant (FCMA), holds the position of Chief Financial Officer (CFO) and has been associated with the Company since 2006. Ms. Hina Mir, a Master of Laws (LLM), serves as the Company Secretary and Head of Legal, having joined the Company in 2021. Together, the leadership team combines extensive experience and expertise in their respective fields, contributing to the Company's strategic direction and operational success.

The management has carried out thorough assessments of both internal and external risks that the Company might face. Businesses face numerous uncertainties that might pose threats to its objectives if not addressed in a timely manner. Energy costs makes up a major portion of the overall cost of production. Any variation in prices of coal and/or electricity tariffs poses a constant risk to the Company. The Company has installed Waste Heat Recovery plant to reduce its cost of power and has obtained a gas connection for the plant. Furthermore, commissioning of solar panels has also been completed. The strategic placement of plant in Nowshera, which is close to the Afghan border and the brand value of Cherat within Afghanistan has helped to retain the position as top exporter of cement to Afghanistan.

Cherat Cement is one of the cement companies that deploys SAP based ERP solution in Pakistan. The software enables the management to generate various regular and customized reports of different frequency (daily, weekly, monthly and yearly) pertaining to production, sales, cement prices and other important financial figures.

Cherat Cement is the first Company in the cement sector which implemented complete SAP solution in 2009. Through this, all business activities including finance, supply chain and inventory management are properly integrated. Users are properly trained on this system. The Company has successfully upgraded from SAP ECC 6.0 to S4/HANA cloud and also successfully implemented SAP Success Factor for certain modules of HR. Proper access and other controls are in place to ensure security of the system.

The overall performance of the local cement industry has remained under stress throughout FY24, majorly due to the economic challenges faced by the country in the form of high inflation, peaking interest rates, and lower developmental activity. Furthermore, political instability resulted in lower PSDP spending, leading to further challenges faced by the construction sector, which was already adversely affected due to the rise in overall costs of inputs. Despite these challenges, the cement industry in Pakistan witnessed marginal growth of 2%, reaching 45.3mln MT during the year ending June 30, 2024, compared to 44.6mln MT last year. Although the local sale volumes declined by 5% (FY24: 38.2mln MT, FY23: 40.0mln MT), the overall surge was driven by a significant rise in export dispatches of 56%, reaching 7.1mln MT, up from 4.6mln MT last year. A similar trend was witnessed during 1QFY25 with the local dispatches recording a decline of ~20% (1QFY25: 8.1mln MT, 1QFY24: 10.1mln MT), while export dispatches grew by ~22% (1QFY25: 2.1mln MT, 1QFY24: 1.8mln MT). Despite the decline in sales volumes, the local cement manufacturers are witnessing a rising trend in their recorded revenues due to the higher prices reflecting the increase in the cost of production that is being passed on to the consumers. As a result, cement manufacturers have successfully maintained their margins. Furthermore, the recent decline in the policy rates is going to further have a positive impact. The industry also witnessed a rise in installed capacity, which now stands at approx. 82mln MT per annum. However, based on the stressed demand, the capacity utilization remained between 50-55% during FY24. Going forward, FY25 brings some relief for the industry in the form of consistent reduction in policy rates, declining inflation, a stable exchange rate, and gradual increases in SBP reserves along with political stability. However, the development activity in the form of construction projects to stimulate the economy is still on hold.

Cherat Cement holds a strong position in the cement industry, with a notable market share of approximately 7%, primarily concentrated in the northern region. This market presence reflects the Company's significant influence in the sector, driven by its established brand and competitive capabilities within its core geographic area.

Sales volume of Cherat Cement reveals a decline of approximately 16% in total dispatches for 1QFY25 compared to the same period last year, with a ~8.5% year-over-year (YOY) decrease in FY24. This decline is primarily attributed to the slowdown in economic activities. However, export dispatches elevate by ~15% in 1QFY25 and ~22% in FY24. The sales mix remained predominantly focused on local sales, which accounted for about ~75% of total dispatches in 1QFY25, compared to ~85% in FY24 and ~88% in FY23. For FY24, the Company’s topline saw a YOY growth of approximately 3%, reaching PKR 38,434 million, up from PKR 37,386 million in FY23. This growth was driven by higher cement prices, which resulted from increased input costs, leading to higher sale prices. However, in 1QFY25, revenue declined by around 4% compared to the same period last year, totaling PKR 9,659 million, down from PKR 10,071 million in 1QFY24.

The Company’s margins saw notable improvement in FY24, driven by enhanced operational efficiency. Gross margins increased to approximately 31% in FY24, up from 27% in FY23. Operating margins also rose to 28%, compared to 24% in the previous year, while net margins grew to 14%, up from 12% in FY23. In 1QFY25, margins continued to show further improvement compared to FY24. Gross margins reached around 40%, operating margins increased to 36%, and net margins climbed to 30%. These improvements reflect the Company’s ongoing focus on operational excellence and cost management.

Cherat Cement is deeply committed to sustainability and actively implements measures to protect the environment and support the community. Over the years, the Company has made significant investments in renewable energy initiatives, including Waste Heat Recovery (WHR) systems, solar panel installations, LED lighting, and WHR on WDF engines. These projects have not only contributed to reducing the carbon footprint but have also led to a decrease in production costs. The Company has significantly expanded its plantation efforts at its manufacturing facility and is also focused on wildlife conservation. As a responsible corporate entity, Cherat Cement continues to contribute to the social development of surrounding areas. Its primary areas of focus include education, healthcare, access to clean drinking water, and women’s empowerment, with various projects in place to achieve these objectives.

During 1QFY25, Cherat Cement's working capital requirements, measured by the net cash cycle (net working capital days), remained at 23 days, the same as in FY24, and an increase from 19 days in FY23. The rise in both FY24 and 1QFY25 is mainly attributed to an increase in receivables. Receivables stood at PKR 1,336 million in 1QFY25 and PKR 1,373 million in FY24, compared to PKR 903 million in FY23. Additionally, the amount of short-term borrowings (STBs) increased to PKR 1,889 million in FY24 and further increase to PKR 2,018 million in 1QFY25, from PKR 1,573 million in FY23.

During FY24, Cherat Cement’s EBITDA increased to PKR 12,498 million, up from PKR 10,843 million in FY23, driven by improved profitability. For 1QFY25, EBITDA stood at PKR 4,154 million, compared to PKR 3,155 million in 1QFY24. Finance costs in FY24 saw a significant decline of approximately 28%, dropping to PKR 1,381 million from PKR 1,914 million in FY23. In 1QFY25, finance costs further decreased sharply to PKR 155 million, primarily due to reduced utilization of borrowings. Additionally, the Company effectively managed costs, which resulted in a notable improvement in debt service coverage, increasing to 26.8x at the end of 1QFY25, up from 9.4x in FY24 and 5.8x in FY23.

During FY24, the company’s total debt was significantly reduced to PKR 5,990 million, down from PKR 11,891 million in FY23 and PKR 17,082 million in FY22. In 1QFY25, the debt saw a slight increase, reaching PKR 6,126 million. However, the Company consistently making regular installment payments. As a result, leverage has been steadily declining, standing at approximately 18% at the end of September 2024, compared to 19% in FY24, 36% in FY23, and 49.7% in FY22. Moving forward, debt levels are not expected to rise, as scheduled repayments are ongoing and no debt-funded projects are planned.