Lahore, July 29, 2020 (PPI-OT): The ratings reflect eminent position of Pakistan Oxygen Limited in industrial and medical gases, healthcare solutions, hard goods and welding segment. The industry largely possesses oligopolistic structure, benefiting the players. Slower demand for industrial gases especially from large scale manufacturers on account of economic slowdown coupled with COVID-19 outbreak and subsequent lockdown kept the product demand depressed, eventually resulting in subdued Company’s profitability.
The ratings take comfort from the rich heritage on account of previous ownership of international group with a solid name in the chemical and gases industries globally. Pakistan Oxygen serves customers across a wide spectrum of industries ranging from chemical and petrochemical to steel, food and healthcare. Going forward Pakistan Oxygen, with its experienced and professional team and largest footprint across Pakistan has approved investment plan to set-up the largest and most efficient air separation unit in Pakistan, the process stands at a preliminary stage.
The incumbent sponsors have added energy to the company and are eyeing expansion, of which the related modalities including funding requirement and mix, being negotiated with relevant institutions. Where existing COVID-19 pandemic has hampered almost all the industrial segments of the country – on the other hand – it has shifted the focus towards the self well-being, healthcare and medical engineering segments, which may result in an increased demand. Reversal of key economy driven challenges; interest rate, inflation will strengthen the financial risk appetite of the Company.
The ratings are dependent on the company’s ability to effectively utilize its existing capacity and management of financial risk particularly the debt coverages, wherein any significant dilution would be imperative for the ratings. Debt-Equity mix and repayment plan for the investment would play a pivotal role in determining financial risk profile. The management is deploying a conservative expansion plan with borrowings carrying terms and conditions that the company can conveniently manage. The entity has been ably catering to a market more than its production capacity. Maintaining strong coverages and sustained market share with better profitability will remain vital.
For more information, contact:
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,