Tag Archives: PACRA

PACRA Assigns Initial Entity Rating to D.G. Khan Cement Company Limited

Lahore, May 04, 2018 (PPI-OT): DG Khan Cement’s rating reflect company’s strong position in the cement industry emanating from its third highest market share in terms of capacity. The company’s two existing manufacturing units (Khairpur Site and DG Khan Site) are operating at full capacity. The profitability is fortified by cost-efficient operational framework translating in strong EBITDA margins. The company has planned commencement of its third manufacturing unit (Hub Site) in Jun-18 which will add capacity of 2.7mln tpa to the company’s existing capacity. This will assist the company in improving its market share amid industry wide capacity expansions going on.

In addition to this, the company is eyeing new export fronts and exploring new opportunities to channel exports in cost-efficient manner. The business profile of the company is strengthened by high capacity utilization, strong local demand, rebounding dispatches on exports front. Furthermore, the established dividend stream of the company from investments in Nishat Group companies continues to augment the bottom-line of the company. The company’s financial risk remains low mainly reflected from moderately leveraged capital structure and robust equity base. The rating derive benefit/comfort from (i) the company’s association with Nishat Group, (ii) strong local demand on the back of rising economic and infrastructure activity.

The ratings are dependent on upholding of the company’s business vis-a-vis financial risk profile. Any significant deterioration in the sector’s outlook particularly any unfavourable change in demand and expansion matrix, thereby exerting pressure on prices and margins, may negatively impact the ratings.

For more information, contact:
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

PACRA Revises IFS Rating of Pakistan General Insurance Company Limited

Lahore, April 11, 2018 (PPI-OT): PGI is braving with stressed times. The company, under the directive of SECP, halted underwriting operations. The management is striving to restore the operations. They have given a representation that all the requisite parameters set by the legal bodies have been met. A verification process is in progress. Following which, the operations are expected to resume. This has taken time.

The rating adjustment reflects the weakening in the business and financial risk profile of the entity. This is a result of significant time being out of market, resuming business again would be a challenge. Bank enlistment is also endangered. The liquidity is significantly affected in the wake of sizeable payments and continued expenses without business.

The sponsors stand beside the company. They have full commitment to make good any deficiency in liquidity. This will depend on the resumption of business and fulfillment of other legal requirements. PACRA opines that, post resumption of business, financial strength needs to be recouped. This needs to be followed by resumption of business lines. PACRA would continue to monitor the developments and update its opinion accordingly.

For more information, contact:
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

PACRA Upgrades Entity Ratings of Engro Polymer and Chemicals Limited

Lahore, January 25, 2018 (PPI-OT):The ratings recognize Engro Polymer’s established foothold in the local PVC segment and leading position in caustic soda market. This emanates from efficient production process, sound technological infrastructure, and effective control environment. EPCL is the only manufacturer of Poly Vinyl Chloride (PVC), having dominant market share. The Company has successfully created liking for its products. Lately, it is enjoying strong margins attributed to global supply crunch, softened ethylene prices along with incremental domestic consumption; boding well with the overall profitability.

Although EPCL has limited influence on both price ends (i) Ethylene – key raw material, and (ii) PVC – key product, import and anti-dumping duties benefit. On demand side, expanding economy – particularly construction – has led to double digit growth; a trend that is expected to hold. On the Caustic Soda front (the other major product), the company enjoys adequate margins and eloquent market share in the southern region, close to plant location.

The uptick in profits, in turn free cashflows, has yielded favourably for EPCL’s financial profile. This is reflected in efficient working capital cycle and healthy coverages; hence, financial risk stays well managed. Moreover, EPCL’s debt-reprofiling has further eased pressure on its financial risk profile. The ratings also reflect EPCL’s association with one of the country’s leading conglomerate – Engro Corp. This association has benefited the company historically.

EPCL is planning to add a capacity of 100K tons to PVC operations and significant debottlenecking of VCM plant. The cost is expected to be little above PKR 10bln. This is going to mainly (~50%) funded through fresh equity while the balance would be a combination of debt and internal generation.

EPCL’s expansionary stance would likely to benefit the company and this is not expected to push up leveraging significantly.The ratings are dependent upon holding sustained operations and continuity of improved margins. Execution of planned expansion, while, with the new debt to be acquired, maintenance of coverages would remain critical.

For more information, contact:
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

PACRA Maintains IFS Rating of Jubilee General Insurance Company Limited

Lahore, January 22, 2018 (PPI-OT):The rating reflects Jubilee General’s robust risk management framework facilitating the company in sustaining sound underwriting performance. The rating recognizes the management’s persistent efforts of penetrating relatively untapped segments, also reflected in its diverse premium mix compared to peers. Jubilee General has sound equity base and sufficient liquidity engendering strong risk absorption capacity. The company’s efforts for improving the overall quality of control environment are bearing fruits.

The ability of key sponsor, Aga Khan Development Network (AKDN), to foster synergies amongst its financial institutions operating in Pakistan – HBL, Jubilee General, and Jubilee Life – and in the group’s different insurance companies across the globe, is also a consideration. The business strategy, going forward, is focused on improving its market position through increasing retail penetration and focusing motor and health insurance; benefiting from synergies with HBL. Jubilee is eyeing high business opportunities for future with the advent of CPEC projects and improved economic dynamics of the country. The rating is dependent upon sustained competitiveness of the company with improvement in underwriting profitability. Sustaining the market share is crucial.

For more information, contact:
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

PACRA Maintains Entity Ratings of Fazal Cloth Mills Limited

Lahore, January 22, 2018 (PPI-OT):Fazal cloth enjoys a strong business profile in otherwise volatile textile industry. This primarily emanates from its large size – yielding economies of scale – established relationships with a diverse customer base- -export and local – and diversity of operations – spinning and weaving. This has helped the entity to sustain its position despite suppressed textile dynamics exerting pressure on prices. With focused marketing efforts, the company has been able to capitalize on additional capacities thereby generating incremental volumes, mainly in spinning segment.

The management expects improved margins on account of (i) saving in power cost given regular supply of RLNG to industry players, and (ii) export – led relief provided by GoP. The management iscontemplating a gradual entry into value-added segment – dyeing and finishing; once implemented, it is likely to further strengthen business risk profile of the entity. Fazal Cloth’s financial risk assessment encompasses irrevocable and unconditional inter-corporate debt guarantee provided to wholly owned subsidiary – Fazal Weaving Mills Limited – with fall back on Fazal Cloth’s cash flows. Nevertheless, overall financial profile is considered adequate.

Although coverages are low, the company’s designed financial strategy keeps sizeable cushion in short-term borrowing lines to meet shortfalls in operational cash flows in servicing debt obligations; this provides flexibility in management of financial affairs. The ratings are dependent on the company’s ability to yield improvement in margins. Meanwhile, management of debt (current and planned), thereby impacting coverages, is considered important. Improvement in business and financial profile along with effective changes in governance framework would be rating positive.

For more information, contact:
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

PACRA Maintains Ratings of Fazal Weaving Mills Limited

Lahore, January 22, 2018 (PPI-OT):The ratings of Fazal Weaving primarily reflect irrevocable and unconditional guarantee on all obligations from financial institutions by Fazal Cloth Mills Limited (Fazal Cloth) – the parent. Fazal Cloth is rated by PACRA (LT Rating: A-) Fazal Weaving, a wholly owned subsidiary of Fazal Cloth, runs a small sized spinning unit. The recent capacity enhancement helped in rationalization of fixed cost translating into improved margins; hence, generating profit for the company. Fazal Weaving’s standalone risk profile is improving.

However, it is still constrained by, (i) high business concentrations – customer as well as geographical (ii) debt driven expansion thus keeping pressure on coverages, and (iii) highly leveraged capital structure. However, regular financial support from Fazal Cloth cushions the risk profile. With better utilization level, nourishing margins, and utilization of free cash-flows to settle debts, the management expects its standalone profile to improve. The rating are dependent on continuation of irrevocable and unconditional guarantee on financial obligation by the parent company. Meanwhile, improvement in stand-alone performance of the entity is considered important.

For more information, contact:
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