Lahore, December 31, 2020 (PPI-OT):Tufail Chemical and Surfactants (Pvt.) Limited’s (the Company) ratings reflect adequate business profile of the Company, characterized by a relatively limited capacity and modest profitability. The Company is associated with Tufail Chemical Industries Limited and majority of its surfactants (LABSA and SLES) sales are channelled through Tufail Chemical Industries Limited. Thus, the Company’s sales remain a factor of overall demand and how it will be benefited at group level. Historically, dumping by various international players has squeezed the margins of the Company.
Imposition of anti-dumping for five years on sulphonic acid imports from various countries, since May-17, has helped the Company in sustaining its profitability. The R and D is done at Group level which has helped the Company in commissioning new surfactants variants. This, alongside continuous BMR activities and experienced management team transpires into operational efficiencies, in turn, improved product profile and stable margins despite challenging environment. The demand for the Company’s products is expected to remain intact with rising income and hygiene awareness.
Meanwhile, the Company has modest financial risk profile, characterized by moderate leveraging, healthy coverages. The Company finances its working capital needs through short term borrowing leading to relatively limited cushion at trade assets level. The assigned ratings incorporates experienced management and the Company’s association with Tufail Group, leading surfactants manufacturer of Pakistan. Strengthening of governance framework will be helpful to the Company.
COVID-19 has impacted the industries all over the world but the Chemical industry sustained really well due to the chemical products being used in this pandemic period. Additionally, growing demand for consumer health products (soaps, etc.) amidst COVID- 19 outbreak has benefited the Company as general hygiene and cleanliness becomes paramount, resulting in increased demand for chemical-based products.
The ratings are dependent on the Company’s ability to sustain its margins, profitability and optimal capacity utilization along with efficiency in working capital cycle. Going forward, continuation of anti-dumping duty will remain critical. Any significant deterioration in margins and/or financial profile will 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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